Tax Dictionary
Paid-in surplus
Paid-in surplus represents amounts paid in to a corporation by its shareholders, not in payment for their stock, but, after their stock has been fully paid for, as an additioanl working capital for the corporation. Such paid-in surplus is not taxable income to the corporation. Nor is it deductible by the shareholder. It becomes an additional cost of the shareholder's stock. If the paid-in surplus consists of property other than money, its basis in the hands of the corporation is the same as it was in the hands of the shareholder.