Redden Co. is a closely held C corporation that owns seven large pieces of property in southern Illinois. The corporation is equally owned by three cousins who acquired the stock from their grandparents. Gold recently was discovered on one of Redden’s properties. Two of the cousins want to mine the gold, but the third cousin is concerned about the mining’s environmental impact. While she doesn’t care about her cousins’ investments, she prefers not to own an interest in any mining company.

Mining operations will result in considerable income to the corporation, and the cousins will recognize dividend income to the extent of any distributions. The corporation’s tax adviser has suggested an S election to minimize double taxation, but the conflict between the cousins first must be resolved. Propose a reorganization strategy that can help resolve the conflict between the cousins. In your proposal, suggest a corporate form that can minimize double taxation for the mining operations.