Hi, 

I am looking at a number of projects that have grant money available for them for historic reasons.  I know that the entity that we create must be a pass through S-corp rather than an LLC in order for the grants to not be treated as taxable income.  

With that being the case, does that impact the taxable basis for my property once it's put into use?  

Consider the following example:

Purchase Price - $100,000

Grant Money for rehab - $50,000

Other Capital for Rehab - $250,000.  

Is the taxable basis for the property $400,000 or $350,000 because we paid no taxes on the money for the grant?