26 C.F.R. § 1.1382-1

Taxable income of cooperatives; gross income

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(a) Introduction. Section 1382(b) provides that the amount of certain patronage dividends (and amounts paid in redemption of nonqualified written notices of allocation) shall not be taken into account by a cooperative organization in determining its taxable income. Such section also provides that, for purposes of the Internal Revenue Code, an amount not taken into account is to be treated in the same manner as an item of gross income and as a deduction therefrom. Therefore, such an amount is treated as a deduction for purposes of applying the Internal Revenue Code and the regulations thereunder and, for simplicity, is referred to as a deduction in the regulations under such Code. However, this should not be regarded as a determination of the character of the amount for other purposes.

(b) Computation of gross income. Any cooperative organization to which part I, subchapter T, chapter 1 of the Code, applies shall not, for any purpose under the Code, exclude from its gross income (as a reduction in gross receipts, an increase in cost of goods sold, or otherwise) the amount of any allocation or distribution to a patron out of the net earnings of such organization with respect to patronage occurring during a taxable year beginning after December 31, 1962. See, however, section 1382(b) and § 1.1382-2 for deductions for certain amounts paid to patrons out of net earnings.

[T.D. 6643, 28 FR 3154, Apr. 2, 1963]

Notes of Decisions

Cited in 5 cases, 1972–1985 · leading case: Union Equity Coop. Exch. v. Comm'r, 58 T.C. 397 (Tax Ct. 1972).

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Union Equity Coop. Exch. v. Comm'r, 58 T.C. 397 (Tax Ct. 1972). · cites it 4× “We note that at least one court has held that the enactment of subch.”

Lamesa Coop. Gin v. Comm'r, 78 T.C. 894 (Tax Ct. 1982). · cites it 2× “↩ 1. For convenience, we will refer to patronage dividends as deductions.”

Seiners Asso. v. Comm'r, 58 T.C. 949 (Tax Ct. 1972). · cites it 2× “Section 1388(g) of the Code defines a per-unit retain certificate as any written notice that discloses to the recipient the stated dollar amount of a per-unit retain allocation to him by the distributing cooperative organization.”

Stevenson Co-Ply, Inc. v. Comm'r, 76 T.C. 637 (Tax Ct. 1981). · cites it 4× “1382-1(b), Income Tax Regs. , expressly requires the inclusion of all of petitioner's long-term gain in the alternative tax computation.”

Kingfisher Coop. Elevator Asso. v. Comm'r, 84 T.C. 600 (Tax Ct. 1985). · cites it 2× “Patronage dividends are referred to herein as deductions for convenience only, without regard to whether technically they should be characterized as deductions or exclusions.”

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