Petaluma Co-Operative Creamery v. Commissioner

OPINION

The issues are (1) whether petitioner operated during its fiscal years 1958 and 1959 as a farmers’ cooperative which was exempt from Federal income taxes; (2) should certain amounts transferred by petitioner in 1958 and 1959 from its undistributed income account to its stated capital be treated as patronage dividends and interest payments; and (8) was petitioner entitled to deductions in 1958 and 1959 for additions to its reserve for bad debts. We must reach issues (2) and (3) only in the event that petitioner was not an exempt cooperative association.

Relying on section 521(b) (2),1…