§ 118. Contributions to the capital of a corporation
(a)
General rule
In the case of a corporation, gross income does not include any contribution to the capital of the taxpayer.
(b)
Contributions in aid of construction, etc.
For purposes of subsection (a), except as provided in subsection (c), the term “contribution to the capital of the taxpayer” does not include any contribution in aid of construction or any other contribution as a customer or potential customer.
(c)
Special rules for water and sewerage disposal utilities
(1)
General rule
For purposes of this section, the term “contribution to the capital of the taxpayer” includes any amount of money or other property received from any person (whether or not a shareholder) by a regulated public utility which provides water or sewerage disposal services if—
(2)
Expenditure rule
An amount meets the requirements of this paragraph if—
(A)
an amount equal to such amount is expended for the acquisition or construction of tangible property described in section
1231
(b)—
(3)
Definitions
For purposes of this subsection—
(4)
Disallowance of deductions and credits; adjusted basis
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure which constitutes a contribution in aid of construction to which this subsection applies. The adjusted basis of any property acquired with contributions in aid of construction to which this subsection applies shall be zero.
(d)
Statute of limitations
If the taxpayer for any taxable year treats an amount as a contribution to the capital of the taxpayer described in subsection (c), then—
(e)
Cross references
(1)
For basis of property acquired by a corporation through a contribution to its capital, see section
362.