Tina is the only shareholder of Edgecombe Corporation. Tinas stock basis is $100,000. Shematerially participates in the business and receives an annual salary of $50,000. Current economicconditions have caused cash flow issues for the corporation so Tina needs to transfer $60,000 tothe business. Tina is trying to determine the best way to structure the cash transfer: a capitalcontribution, a loan to protect the stock investment or a loan to protect her salary. From a taxperspective, how would you advise Tina to structure the transaction in the event economicconditions continue to decline and the corporation may have to file for bankruptcy? Support yourposition with primary tax authority.
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