I have an S-Corp Client. They are obligated to have 5 affordable homes within on of their current subdivisions Part of the approval was to earmark 5 lots that would deemed affordable. They are wondering they simply gift 5 lots to the local housing authority, what kind of tax benefit this would have for the S-Corp? Instead of building the 5 affordable homes.

I know that an S-Corp cannot make the contribution  If a trust, estate, partnership, or corporation makes a gift, the individual beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes. A gratuitous transfer of property by a corporation is considered to be a gift by the shareholders to the donee, while a gift to a corporation is considered to be a gift to its shareholders

My question is, does the shareholder have to have a basis in the S-Corp to be able to take the contribution.  I am not sure if my shareholders have as much basis as the actual land donation will be.   

Thanks
Jacquie