§1382 — Taxable income of cooperatives
22 cases·4 followed·3 distinguished·15 cited—18% support
Statute Text — 26 U.S.C. §1382
Except as provided in subsection (b), the gross income of any organization to which this part applies shall be determined without any adjustment (as a reduction in gross receipts, an increase in cost of goods sold, or otherwise) by reason of any allocation or distribution to a patron out of the net earnings of such organization or by reason of any amount paid to a patron as a per-unit retain allocation (as defined in section 1388(f)).
In determining the taxable income of an organization to which this part applies, there shall not be taken into account amounts paid during the payment period for the taxable year—
as patronage dividends (as defined in section 1388(a)), to the extent paid in money, qualified written notices of allocation (as defined in section 1388(c)), or other property (except nonqualified written notices of allocation (as defined in section 1388(d))) with respect to patronage occurring during such taxable year;
in money or other property (except written notices of allocation) in redemption of a nonqualified written notice of allocation which was paid as a patronage dividend during the payment period for the taxable year during which the patronage occurred;
as per-unit retain allocations (as defined in section 1388(f)), to the extent paid in money, qualified per-unit retain certificates (as defined in section 1388(h)), or other property (except nonqualified per-unit retain certificates, as defined in section 1388(i)) with respect to marketing occurring during such taxable year; or
in money or other property (except per-unit retain certificates) in redemption of a nonqualified per-unit retain certificate which was paid as a per-unit retain allocation during the payment period for the taxable year during which the marketing occurred.
For purposes of this title, any amount not taken into account under the preceding sentence shall, in the case of an amount described in paragraph (1) or (2), be treated in the same manner as an item of gross income and as a deduction therefrom, and in the case of an amount described in paragraph (3) or (4), be treated as a deduction in arriving at gross income.
In determining the taxable income of an organization described in section 1381(a)(1), there shall be allowed as a deduction (in addition to other deductions allowable under this chapter)—
amounts paid during the taxable year as dividends on its capital stock; and
amounts paid during the payment period for the taxable year—
in money, qualified written notices of allocation, or other property (except nonqualified written notices of allocation) on a patronage basis to patrons with respect to its earnings during such taxable year which are derived from business done for the United States or any of its agencies or from sources other than patronage, or
in money or other property (except written notices of allocation) in redemption of a nonqualified written notice of allocation which was paid, during the payment period for the taxable year during which the earnings were derived, on a patronage basis to a patron with respect to earnings derived from business or sources described in subparagraph (A).
For purposes of subsections (b) and (c)(2), the payment period for any taxable year is the period beginning with the first day of such taxable year and ending with the fifteenth day of the ninth month following the close of such year. For purposes of subsections (b)(1) and (c)(2)(A), a qualified check issued during the payment period shall be treated as an amount paid in money during such period if endorsed and cashed on or before the 90th day after the close of such period.
For purposes of subsection (b), in the case of a pooling arrangement for the marketing of products—
the patronage shall (to the extent provided in regulations prescribed by the Secretary) be treated as patronage occurring during the taxable year in which the pool closes, and
the marketing of products shall be treated as occurring during any of the taxable years in which the pool is open.
If any portion of the earnings from business done with or for patrons is includible in the organization’s gross income for a taxable year after the taxable year during which the patronage occurred, then for purposes of applying paragraphs (1) and (2) of subsection (b) to such portion the patronage shall, to the extent provided in regulations prescribed by the Secretary, be considered to have occurred during the taxable year of the organization during which such earnings are includible in gross income.
An organization described in section 1381(a) which is engaged in pooling arrangements for the marketing of products may compute its taxable income with respect to any pool opened prior to
March 1, 1978
, under the completed crop pool method of accounting if—
the organization has computed its taxable income under such method for the 10 taxable years ending with its first taxable year beginning after
December 31, 1976
, and
with respect to the pool, the organization has entered into an agreement with the United States or any of its agencies which includes provisions to the effect that—
the United States or such agency shall provide a loan to the organization with the products comprising the pool serving as collateral for such loan,
the organization shall use an amount equal to the proceeds of such loan to make price support advances to eligible producers (as determined by the United States or such agency), to defray costs of handling, processing, and storing such products, or to pay all or part of any administrative costs associated with the price support program,
an amount equal to the net proceeds (as determined under such agreement) from the sale or exchange of the products in the pool shall be used to repay such loan until such loan is repaid in full (or all the products in the pool are disposed of), and
the net gains (as determined under such agreement) from the sale or exchange of such products shall be distributed to eligible producers, except to the extent that the United States or such agency permits otherwise.
For purposes of this subsection, the term “completed crop pool method of accounting” means a method of accounting under which gain or loss is computed separately for each crop year pool in the year in which the last of the products in the pool are disposed of.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.1382-1 Taxable income of cooperatives; gross income
- Treas. Reg. §Treas. Reg. §1.1382-1(a) Introduction.
- Treas. Reg. §Treas. Reg. §1.1382-1(b) Computation of gross income.
- Treas. Reg. §Treas. Reg. §1.1382-2 Taxable income of cooperatives; treatment of patronage dividends
- Treas. Reg. §Treas. Reg. §1.1382-2(a) In general.
- Treas. Reg. §Treas. Reg. §1.1382-2(b) Deduction for patronage dividends—(1) In general.
- Treas. Reg. §Treas. Reg. §1.1382-2(c) Deduction for amounts paid in redemption of certain nonqualified written notices of allocation.
- Treas. Reg. §Treas. Reg. §1.1382-3 Taxable income of cooperatives; special deductions for exempt farmers' cooperatives
- Treas. Reg. §Treas. Reg. §1.1382-3(a) In general.
- Treas. Reg. §Treas. Reg. §1.1382-3(b) Deduction for dividends paid on capital stock.
- Treas. Reg. §Treas. Reg. §1.1382-3(c) Deduction for amounts allocated from income not derived from patronage—(1) In general.
- Treas. Reg. §Treas. Reg. §1.1382-3(d) Deduction for amounts paid in redemption of certain nonqualified written notices of allocation.
- Treas. Reg. §Treas. Reg. §1.1382-3(e) Applicability date.
- Treas. Reg. §Treas. Reg. §1.1382-4 Taxable income of cooperatives; payment period for each taxable year
- Treas. Reg. §Treas. Reg. §1.1382-5 Taxable income of cooperatives; products marketed under pooling arrangements
- Treas. Reg. §Treas. Reg. §1.1382-6 Taxable income of cooperatives; treatment of earnings received after patronage occurred
- Treas. Reg. §Treas. Reg. §1.1382-7 Special rules applicable to cooperative associations exempt from tax before January 1, 1952
- Treas. Reg. §Treas. Reg. §1.1382-7(a) Basis of property.
- Treas. Reg. §Treas. Reg. §1.1382-7(b) Amortization of bond premium.
- Treas. Reg. §Treas. Reg. §1.1382-7(c) Amortization of mortgage premium.
22 Citing Cases
Subsection (b)(1) of section 1382 provides an exception that, in effect, allows a deduction from gross income for the payment of "patronage dividends" .
s. Section 199(d)(3)(C) does provide, however, that "[f]or purposes ofthis section, the taxable income ofa specified agricultural or horticultural cooperative shall be computed without regard to any deduction allowable under subsection (b) or (c) or section 1382". Because section 199(d)(3)(C) references the cooperative's computation oftaxable income, the Court must address whether the general principles ofsubchapter T require separate computations ofa patronage DPAD and a nonpatronage DPAD. Subc
Introduction Section 1382 addresses the taxable income of cooperatives, such as petitioner, to which section 1381 applies (individually, a subchapter T cooperative).