8
whether it is a membership organization under section 2774, as
respondent contends. If petitioner is subject to subchapter T,
we must also decide whether interest income petitioner received
is patronage or nonpatronage sourced under section 1388(j)(1).
We consider several sections in our analysis of this case:
(1) section 216, which defines cooperative housing corporations;
(2) section 277, which applies to social clubs and other
membership organizations; and (3) sections 1381-1388 (subchapter
T), which apply to corporations that operate on a cooperative
3(...continued)
(C) which is engaged in furnishing electric
energy, or providing telephone service, to persons in
rural areas.
4 Section 277 provides as follows:
SEC. 277(a). General Rule.--In the case of a social club or
other membership organization which is operated primarily to
furnish services or goods to members and which is not exempt
from taxation, deductions for the taxable year attributable
to furnishing services, insurance, goods, or other items of
value to members shall be allowed only to the extent of
income derived during such year from members or transactions
with members (including income derived during such year from
institutes and trade shows which are primarily for the
education of members). If for any taxable year such
deductions exceed such income, the excess shall be treated
as a deduction attributable to furnishing services,
insurance, goods, or other items of value to members paid or
incurred in the succeeding taxable year. The deductions
provided by sections 243, 244, and 245 (relating to
dividends received by corporations) shall not be allowed to
any organization to which this section applies for the
taxable year.
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