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total gain of $118,896,624 on its return for the taxable
year ending August 31, 1983, $118,191,603 on its return for
the taxable year ending August 31, 1984, and $879,783 on
its return for the taxable year ending August 31, 1986.
The gain reported for fiscal year 1986 resulted from
payments arising from various post-sale agreements between
petitioner and PLC. Petitioner did not report any gain
from the sale on its return for the taxable year ending
August 31, 1985.
During the years in issue, petitioner maintained a
total of approximately 20 allocation units for the purpose
of calculating patronage refunds. From its accounting
records of merchandise sold, petitioner determined the
member sales and nonmember sales attributable to each
allocation unit. Petitioner defined a member sale as a
sale of property or services to a person or entity
entitled to receive patronage dividends. This includes
sales to members, associate members, and certain
nonmembers who are entitled to receive patronage dividends
under contractual arrangements. Petitioner defined a
nonmember sale as a sale of property or services to a
person or entity who is not entitled to receive patronage
dividends.
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