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AI Contribution Agreement Review

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A contribution agreement documents a member or shareholder's contribution of cash, property, or services to an LLC, partnership, or corporation in exchange for equity. Justee reviews contribution agreements against IRC §721 (partnership) or §351 (corporation) non-recognition rules and flags basis, encumbrance, and capital-account issues.

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Key Takeaways

IRC §721 / §351 non-recognition requires specific structuring to avoid taxable contribution

Property contributions trigger §704(c) built-in gain tracking for the contributing partner

Encumbered property contributions can trigger gain under §752 if liabilities exceed basis

1-2 minutes*

Average Review Time

170+ compliance points analyzed*

Compliance Checks

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* Estimates based on typical documents. Actual results vary by document type and complexity.

Contribution agreements are the foundational equity-issuance document for LLCs, partnerships, and corporations — and they sit at the intersection of state corporate law and federal tax non-recognition rules. IRC §721 generally allows tax-free contributions to partnerships and LLCs in exchange for partnership interests; IRC §351 provides similar treatment for corporate contributions if the contributors collectively control 80% of the corporation post-contribution. Property contributions trigger §704(c) built-in gain or loss that must be tracked separately for the contributing partner. Encumbered property (subject to debt) can trigger gain recognition under IRC §752 if the relief from liability exceeds the contributing partner's basis. Service contributions are taxed differently — typically as ordinary income under Rev. Proc. 93-27 unless the interest received is a non-vested profits interest. Justee analyzes contribution agreements against §721/§351, §704(c), §752, and Rev. Proc. 93-27/2001-43 to flag tax issues before they appear on a K-1 or 1099. Free, instant, attorney-verified.

How It Works

1

Upload Your Document

Upload your contract in PDF, DOCX, or TXT format

2

AI Analysis

Our AI reviews your document for compliance issues

3

Review Findings

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4

Take Action

Use our suggestions to improve your document

What We Check

Verifies §721 / §351 non-recognition structuring

Tracks §704(c) built-in gain for property contributions

Flags §752 encumbered property gain triggers

Identifies service contributions taxable as ordinary income

Confirms capital account credits match contribution value

Common Risks We Identify

Encumbered property triggers §752 gain — unflagged

Service contribution treated as tax-free incorrectly

§704(c) gain not tracked for contributing partner

§351 control test fails post-contribution

Capital account credit doesn't match property FMV

Hypothetical Case Study by Justee

Justee recently analyzed a contribution agreement valuing the building at $5M with $4.2M debt assumed by the LLC for a real-estate-development LLC in Austin contributing a building subject to a $4.2M mortgage in exchange for a 30% membership interest.

Issue Found: The contributing partner's basis in the building was $2.8M. Under IRC §752, the $4.2M debt relief exceeded the partner's share of LLC liabilities by $1.1M, triggering immediate gain recognition. The agreement said "tax-free under §721" — wrong. The partner faced a surprise $200K+ tax bill.

Justee Recommendation: We restructured the contribution to keep the debt with the contributing partner via a guarantee/indemnity that allocated debt under Treas. Reg. §1.752-2 such that no debt relief exceeded basis. We also added §704(c) tracking provisions for the $2.2M built-in gain.

Tax Treatment Boilerplate Without Structuring

Problematic Language

"The Contribution shall be tax-free under IRC Section 721. Each Member shall consult their own tax advisor."

Recommended Language

"The Contribution is intended to qualify for non-recognition under IRC §721. The Members acknowledge that (i) Member A is contributing real property subject to indebtedness of $[amount]; (ii) the Company shall maintain Capital Accounts in accordance with Treas. Reg. §1.704-1(b)(2)(iv); (iii) built-in gain on the Contributed Property shall be allocated to Member A under §704(c) using the [traditional/curative/remedial] method; and (iv) liabilities shall be allocated under Treas. Reg. §1.752-2 in accordance with Schedule [X], which reflects Member A's personal guarantee of the underlying mortgage."

Why it matters: Boilerplate "tax-free under §721" is meaningless without §704(c) and §752 implementation. The amended language operationalizes the tax treatment.

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"Justee is redefining the legal document compliance process across all practice areas, transforming hours of work into minutes, while reducing stress and boosting accuracy."

Artem Dolukhanyan
Artem Dolukhanyan

Partner, Corporate Transactions at Grayver Law Group

AI Review vs. Manual Review

FeatureJustee AI ReviewManual Review
Review Time2-5 minutes2-4 hours
CostFree trial available$150-500+
Legal CitationsAutomaticVaries by reviewer
Clause SuggestionsIncludedExtra fee
Availability24/7 instantBusiness hours
* Comparison data represents estimates based on industry research and internal testing for typical contract types. Review times, costs, and accuracy percentages vary by document complexity, length, jurisdiction, and specific legal requirements. See full disclaimer below.

Official Resources

IRS Section 721 Non-Recognition

26 U.S.C. §721 partnership contributions

IRS Section 351 Corporate Contributions

26 U.S.C. §351 corporate non-recognition

Treas. Reg. §1.752-2 Liabilities

Liability allocation in partnerships

Related Document Reviews

LLC Operating Agreement ReviewMembership Interest ReallocationSubscription Agreement Review
Important Legal Disclaimer

Not Legal Advice: The information and analysis provided by Justee AI is for general informational purposes only and does not constitute legal advice. While we strive to provide accurate and helpful information, our AI-powered service is not a substitute for professional legal counsel.

No Attorney-Client Relationship: Use of Justee AI does not create an attorney-client relationship. Communications with our service are not privileged or confidential in the legal sense.

Consult a Professional: For specific legal matters, we strongly recommend consulting with a qualified attorney licensed in your jurisdiction. Legal requirements vary by location and circumstances, and only a licensed attorney can provide advice tailored to your specific situation.

Performance Estimates (*): All statistics, metrics, and numerical claims on this page — including review times, cost comparisons, accuracy percentages, and database size — are estimates based on internal testing, industry research, and typical use cases. Actual results vary based on document type, complexity, length, jurisdiction, and other factors. Cost comparisons reference publicly available average attorney rates and are not guaranteed savings. "1M+ laws and regulations" refers to the breadth of Justee's reference database and does not imply that every provision is checked against every law for every document.

By using our service, you acknowledge that you have read and agree to our Terms of Use and understand the limitations of AI-powered legal analysis. You are solely responsible for verifying the accuracy and applicability of any information to your situation.

Contribution Agreement Review FAQ

Often, but not automatically. §721 and §351 require specific control, structuring, and timing. Justee reviews your contribution against the non-recognition tests and flags failures.

When a partner contributes property worth more or less than basis, the built-in gain or loss is allocated to that partner over time. Justee verifies your agreement includes §704(c) tracking provisions.

Yes, but services are typically taxed as ordinary income (§83). Profits-interest exceptions exist under Rev. Proc. 93-27. Justee flags service contributions and recommends a profits-interest structure where appropriate.

Debt relief exceeding basis triggers gain under §752. Justee analyzes the debt-to-basis ratio and recommends restructuring (guarantee, indemnity, or §704(c)(1)(B) deferral).

No. Justee flags issues for CPA discussion. Tax-sensitive contributions should always involve your CPA or tax counsel. Justee accelerates the diligence.

Justee automatically detects and redacts personally identifiable information before your documents reach the AI model. Protected types include:

Personal data:
  • Names, email addresses, and phone numbers
  • Social Security numbers and tax identifiers (ITIN)
  • Physical addresses and dates of birth
  • Credit card and bank account numbers
  • Driver's license and passport numbers
  • Medical provider identifiers (NPI) and case numbers
Corporate and business data:
  • Company and organization names
  • Business addresses and geographic locations
  • SWIFT/BIC codes, IBAN numbers, and bank routing numbers
  • Business license numbers and attorney bar IDs
  • Corporate tax identifiers (EIN)
Our system achieves 100% detection of standard PII types and approximately 97% overall coverage. Certain rare identifiers — such as cryptocurrency wallet addresses and MAC addresses — may not be detected automatically. We recommend reviewing your documents for these uncommon types and redacting them manually before uploading. See our Privacy Policy and Terms of Use for details and limitations.

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Last updated: May 13, 2026

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