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gain on the sale of the automobile was patronage income,
the court stated:
The gain on the sale of the automobile was
patronage-sourced because * * * it was “directly
related” to the plaintiff’s normal activities.
The automobile was one of three used in the
plaintiff’s business, and the cost of operating
it, including depreciation, was treated as an
expense of serving plaintiff’s patrons. The
sale of the car when it was no longer needed
for plaintiff’s business, was closely related
to and stemmed from the prior use of the car.
Depreciable assets used in a business were out
and become obsolete, and when that happens,
frequently they are sold or traded in for a
replacement. * * * [St. Louis Bank for
Cooperatives v. United States, 624 F.2d at
1053-1054.]
We believe that the sale of the miscellaneous assets in
this case was closely related to and stemmed from their use
in petitioner’s cooperative enterprise of providing
petroleum products to its patrons. Accordingly, we find
that petitioner’s sales of the subject assets were directly
related to its patronage activities of supplying products
to and marketing products for its members. We therefore
find that the subject gain can be classified as from
patronage sources.
A final note is necessary. As mentioned above,
petitioner argues, if we adopt respondent’s per se rule,
then the stock of Terra, Seaway, and Am-Mex were noncapital
assets in its hands “under case law ‘surrogacy’, ‘source of
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