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In the subject notice of deficiency, respondent
reclassifies the portion of the gain representing the
aggregate amount realized in excess of cost basis,
$1,210,245, as nonpatronage capital gain. Respondent does
not adjust petitioner's treatment of the portion of the
gain representing aggregate section 1245 recapture as
ordinary income from patronage sources.
In describing the adjustments involving the gain realized
from the sale of petitioner’s soybean facilities and the gain
from the sale of the above miscellaneous section 1231 assets,
the notice of deficiency states as follows:
The section 1231 gain realized on the sale of the
soybean processing facilities must be recognized and
treated as non-patronage capital gain and may not be
offset by patronage losses. Accordingly, your non-
patronage capital gains are increased by $1,712,148;
the patronage ordinary income you reported is
decreased by $(1,632,724); and the non-patronage
ordinary income you reported is decreased by
$(79,424), in your fiscal year ending August 31,
1983.
The increase in “non-patronage capital gains” of $1,712,148
determined in the notice consists of $501,903, attributable
to the sale of petitioner’s soybean facilities, and
$1,210,245, attributable to the sale of miscellaneous
assets.
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