Successful and Effective Tax Planning Series: New Client Tommy Kid

This tax planning example is only for illustrative and discussion purposes only. The individuals mentioned in this example do not exist, and if they do, it is only by mere coincidence.

Tommy Kid Oil & Gas Fracking Company

Due to the downturn in oil prices, the price of many local oil and gas fracking businesses just got real cheap. Tommy Kid is 52 years old and just retired from Shell Oil and Refining, after 30 years of service. Tommy recently purchased one of these fracking companies for $500,000 in cash and a 5 year promissory note for $100,000 @ 3.5% simple interest, payable annually, for a total purchase price of $600,000. I am advising Tommy Kid that he incorporate his oil and gas fracking business and elect S corporation status for Federal income tax purposes.

The question is why did I recommend S corporation status for my new client Tommy Kid and not a regular C corporation, Partnership, or LLC?

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