I was thinking of starting a corporation and starting it up with $10,000 of my own money. How would this transfer effect my taxes both personal and corporate?
Well, on the facts provided, which are only slightly better than “Money is exchanged for other assets. Tax treatment?”, here is a thumbnail sketch of the preliminary analysis:
Corporate
Under 26 U.S.C. 351, there is no gain nor loss recognized by the corporation where cash is exchanged for stock by the corporation’s sole, controlling shareholder. Thus your mere transfer has no effect on the corporation’s tax liability.
Personal
If the $10K is from income you earned in the current tax year, it will be included in your gross income for your personal income tax that year. If you took it from previous years’ savings, you’ve already paid tax on it then.
The stock you take from your corporation will have a $10K basis for cap gains calculations.
You do not get a deduction or credit just for forming your own corporation. There are ways to handle start-up expenses (which are different transactions than the $10K transfer) with respect to both personal and corporate taxation. But you couldn’t say anything meaningful on that front on the thin facts you’ve given above, and furthermore that would be way beyond the scope of this message board anyhow.
Saint Cad, I hope you either have some business backround and education, or you’re willing to learn a lot of it before starting a corporation. There are many ways to learn this stuff, from classes to online sources to small-business-for-dummies books.
CPAs don’t work cheap, and they charge extra for hair pulled out over ignorant business practices.
Oh, and good luck to you.