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reserve were nontaxable contributions to capital. We upheld
capital contribution treatment of the assessments on the ground
that the replacement reserve was in a separate bank account
earmarked solely for capital expenditures, and the member
received no goods or services in consideration for the payments
to the replacement reserve. Although we were concerned that
members had no right, upon the transfer of their memberships or
at any other time, to any of the contributed amounts in the
replacement reserve, we concluded that this did not compel a
different result because it did appear that the amounts
contributed to the replacement reserve did bear some relation to
the value of the members’ equity in the taxpayer. Id. at 157.
Cases that have denied capital contribution treatment, on
which respondent relies, are also instructive in determining the
characteristics of a capital contribution.
In United Grocers, Ltd. v. United States, 308 F.2d 634 (9th
Cir. 1962), the taxpayer, a grocery-buying cooperative, charged
its members monthly dues to participate in the cooperative. The
Court of Appeals for the Ninth Circuit concluded that the members
had no investment motive in paying the dues because memberships
were not transferable, and there was no way that members could
recover their investments in the corporation.
In Washington Athletic Club v. United States, 614 F.2d 670
(9th Cir. 1980), the court concluded that the membership-type
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