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made to petitioner. At the time of these transactions,
Terra owed petitioner a total of $150 million. Petitioner
claimed a deduction pursuant to section 243 equal to the
entire amount of the cash dividend received from Terra.
The May 1983 dividend was not intended to offset an
increase in the price of crude oil or natural gas.
Because the dividend was excluded from petitioner's income
under section 243, it did not enter into petitioner's
calculation of patronage income for its 1983 fiscal year.
In July 1983, Terra paid another dividend, trans-
ferring to petitioner its interest in the Axom Limited
Partnership, which was valued at $4,797,890. Petitioner
received and reported as income an additional $161,573 in
dividends from Terra during its 1983 tax year. It
reported both of these dividends as patronage income.
Petitioner reported the dividends it received with respect
to all other stock as nonpatronage income.
Petitioner did not sell its Terra stock because of
any increase or decrease in the market price of crude oil
or natural gas, or any contemporaneous purchase of crude
oil or natural gas on the open market. Petitioner
exercised its option to purchase crude oil produced by
Terra several times between the date of the sale and the
time of trial. Although the call option has benefited
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