Business & farm

Yes, the grant is tax exempt and because it is not a loan and does not have to be repaid.  It would be an adjustment to the capital account and cash when received. This is how you would record it on the 1120S return.

For more information you can use this link: Instructions for Form 1120-S

• Excerpt: Column (d). Other Adjustments Account

  The other adjustments account is adjusted for tax-exempt income and federal taxes attributable to a C corporation tax year. After these adjustments are made, the account is reduced for any distributions made during the year. 

  • Do not enter the related expenses here because they are tax deductible and should be included with all normal business expenses.