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The loss realized on the sale of the Seaway
Pipeline, Inc., stock must be recognized as
nonpatronage capital loss and may not be offset
by patronage income. Accordingly, your non-
patronage capital losses are increased by
$(2,299,595); the patronage ordinary loss you
reported is decreased by $2,082,785; and the
nonpatronage ordinary loss you reported is
decreased by $216,810, in your fiscal year
ending August 31, 1984.
Mex-Am Crude Corp.
In an attempt to expand its access to crude oil from
sources outside the United States, petitioner became one
of nine equal subscribers to the capital stock of the Mex-
Am Crude Corp. (Mex-Am). All of these subscribers were
companies that engaged in refining crude oil and required
reliable access to adequate supplies of crude. Mex-Am was
incorporated on September 17, 1982. It was organized to
purchase oil in large volumes from Petroleos Mexicanos
(PEMEX) on a collective basis for the benefit of its
shareholders. Each of Mex-Am's shareholders was obligated
to purchase a portion of the crude oil Mex-Am acquired
from PEMEX. This obligation terminated if at any time a
shareholder surrendered its stock for no consideration.
Petitioner did not hold its Mex-Am stock for sale in
the ordinary course of business. For financial reporting
purposes, petitioner reported its stock in Mex-Am in an
account on its balance sheet labeled “Other Investments”.
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