Ohio Farm Bureau Federation, Inc. - Page 1

                                   106 T.C. No. 11                                    

                               UNITED STATES TAX COURT                                

                  OHIO FARM BUREAU FEDERATION, INC., Petitioner v.                    
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 18614-93.                  Filed April 11, 1996.            

                    P, a tax-exempt agricultural organization, engaged                
               in activities to promote the use of agricultural                       
               cooperatives among farmers.  In 1934, P formed L, a                    
               statewide cooperative.  In 1949, P and L entered into a                
               written contract, whereby P agreed to perform                          
               educational and promotional activities on behalf of L                  
               in exchange for a fee.  Pursuant to the contract, P                    
               performed activities to promote cooperatives in general                
               and L specifically.                                                    
                    In 1985, L merged into another cooperative.  In                   
               connection with the merger, P and L formally terminated                
               their contractual relationship pursuant to a written                   
               termination agreement.  The termination agreement                      
               contained a nonsponsorship and noncompetition clause,                  
               whereby P agreed not to sponsor or promote a competing                 
               cooperative on an exclusive basis.  In consideration                   
               for the nonsponsorship and noncompetition agreement, P                 
               received $2,064,500.                                                   

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