ABSTRACT This study investigates the influence of TRA86, pre-TRA86 tax strategies, and firm characteristics,on,S conversions,in the natural resource,industry. TRA86 shifted substantial individual tax costs to corporations, inviting conversions, but also low- ered corporate,marginal,tax rates and,changed,aspects,of the built-in gain provision to reduce,conversion,benefits. Built-in gain changes,affect industries differently be- cause,of differences,in asset composition,and,economic,conditions. The natural resource,industry had,substantial built-in gain potential and,was,consolidating,and restructuring during the mid-80s, making built-in gain realization likely. Our results suggest,that built-in gains negatively influenced,conversions,in the natural resource industry. This study enhances,our understanding,of the interaction between,TRA86 rate changes,and,other provisions,on incentives,to convert,from C to S corporate status. It also contributes,to the organizational,form,literature by identifying factors related to TRA86, S corporation operating restrictions, firm characteristics, and tax strategies that influence conversion,decisions.