Colony Farms Cooperative Diary, Inc. v. Commissioner
United States Tax Court
The patronage dividends paid by petitioner, a cooperative, to its members in certificates of interest in a fund representing its excess of gross receipts from member products sold over operating expenses and segregated on its books as a "Reserve for Members' Equity," held not to have been paid in the exercise of discretion by its directors but under a fixed and legal obligation under the provisions of its charter, bylaws, and contracts with its members and, as such, subject…
Read the full summary
The patronage dividends paid by petitioner, a cooperative, to its members in certificates of interest in a fund representing its excess of gross receipts from member products sold over operating expenses and segregated on its books as a "Reserve for Members' Equity," held not to have been paid in the exercise of discretion by its directors but under a fixed and legal obligation under the provisions of its charter, bylaws, and contracts with its members and, as such, subject to exclusion in computing its net income subject to tax. United Cooperatives, Inc., 4 T. C. 93, followed.
1Opinion of the Court
OPINION.
Leech, Judge:
By reason of the large amount of business done by petitioner, a cooperative, for its nonmembers, it is not entitled to and does not claim tax immunity. Nor is the question here one of its right to a deduction from gross income in computing net income subject to tax. Our question is its right to exclude from its gross receipts earnings upon business done for or with its members, where, under its charter, bylaws, and marketing contracts with its members, such profits are segregated for return to such members in the form of patronage dividends.
This problem is not new, and…
2Cases cited4 opinions
- Harbor Plywood Corp. v. CommissionerUnited States Tax Court · 1950
- Peoples Gin Co., Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1941
- FOUNTAIN CITY CO-OP. CR. ASS'N v. Commissioner of Int. Rev.Court of Appeals for the Seventh Circuit · 1949
- Fountain City Cooperative Creamery Asso. v. CommissionerUnited States Tax Court · 1947
3Cited by1 opinion
- Colony Farms Cooperative Diary, Inc. v. CommissionerUnited States Tax Court · 1951