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a transaction that is directly related to petitioner’s
cooperative enterprise and, therefore, is patronage income.
Soybean Processing Facilities
Part of petitioner’s patronage activities during the
years in issue included purchasing soybeans from its
patrons and processing them into soy oil and soy meal.
Petitioner sold the soy oil to unrelated food processors
for use in products such as margarine and processed the soy
meal into livestock feed which it sold to its members.
Petitioner sold its soybean processing facilities as part
of a plan to consolidate its soybean processing operations
with those of Boone Valley and Land O’Lakes.
The circumstances surrounding petitioner’s sale of the
soybean facilities are similar to those surrounding the
sale of the Lamont gas plant. Petitioner sold its soybean
facilities as part of a plan to make those operations more
profitable for its patrons. The consolidation plan was
completed in four steps: (1) Petitioner sold its soybean
facilities to Boone Valley for $29.1 million; (2)
petitioner purchased Boone Valley’s Eagle Grove, Iowa, feed
mill for $10 million; (3) Boone Valley changed its name to
Ag Processing, Inc.; and (4) the patrons of petitioner,
Land O’Lakes, and the former Boone Valley received all of
the equity interest in Ag Processing, Inc. The result of
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