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LSDefine

Simple English definitions for legal terms

ABC transaction

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A quick definition of ABC transaction:

An ABC transaction is a type of sale in the oil and gas industry. It involves an owner (A) selling a working interest to an operator (B) for cash and the promise of a larger payment when the well produces. A then sells the right to the production payment to a corporation (C) for cash borrowed from a lender. This allows A to receive cash taxed at lower rates and B to pay part of the purchase price with non-taxable production income. However, the tax benefits of this transaction were eliminated in 1969 by the Tax Reform Act.

A more thorough explanation:

An ABC transaction in the oil and gas industry is when:

  • Owner A sells a working interest to Operator B for a cash payment and the right to a larger payment when the well produces.
  • Owner A then sells the right to the production payment to Corporation C.
  • Corporation C pays Owner A in cash borrowed from a lender, using the production payment as collateral.

The purpose of this transaction is to provide tax advantages for Owner A. They receive cash taxed at capital-gains rates, while Operator B pays part of the purchase price with nontaxable production income.

For example, let's say Owner A sells a working interest to Operator B for $100,000 and the right to a production payment of $500,000. Owner A then sells the production payment to Corporation C for $400,000. Corporation C borrows $400,000 from a lender and uses the production payment as collateral. Owner A receives $400,000 in cash and pays taxes at the lower capital-gains rate.

This type of transaction was popular in the past but was eliminated by the Tax Reform Act of 1969.

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im distracting myself by schizo-scrolling r/lawschoolamissions and every conceivable data point on this godforsaken website
it is not working
Haaa I naturally want to do that too. I’m trying to stop. They need a surgeon general’s warning on this site for perspective law students
i spend more time on here then anything else trying to rationalize that the waves from last year will match waves for this year (they won't) and that the stats of people with the same stats are indicative of my own (they aren't)
There aren't many people in my stat range so I pretty much know every result in my range after being on here for a few years
9:28
congrats on the 172 bruce
go dawgs fr
9:29
roll tide
do we foresee a fordham election day wave today (i'm delusional)
WorthlessAttractiveZombie
9:31
I think so, Jack
9:31
some people hate him. some people love him, but he a real one: https://youtu.be/w5oEqiVQcF4?t=173
9:32
[kevin oleary]
worthless i trust you implicitly you know what it will happen now.
worthless i trust you implicitly you know what it will happen now.
worthless i trust you implicitly you know what it will happen now.
worthless i trust you implicitly you know what it will happen now.
worthless i trust you implicitly you know what it will happen now.
WorthlessAttractiveZombie
9:34
I mean if Fordham doesn't release today I will purposefully get on a train, go to new york, and then take the stinkiest shit inside the admission office's toilet (potentially clogging it and forcing them to get a plumber)
IS IT ONLY ON MY END WHY DID THAT SEND TEN MILLION TIMES
HELLO
WorthlessAttractiveZombie
9:35
it sent a million times lol
WHAT HAPPENED
yeah i thought you were tweaking for a second
i'm so sorry everyone what the actual fuck this website hates me
WorthlessAttractiveZombie
9:35
Jack's just tweaking on LSD no biggie
to be fair this accurately represents my mental state
election day psychosis coming in hot (fordham)
usc pls pull through .....
i literally just need one A so i can relax before my ED decision
WorthlessAttractiveZombie
9:38
oh that's right USC might release
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