Farmland Industries, Inc. - Page 71




                                       - 66 -                                         
                                       OPINION                                        
                  Petitioner is a nonexempt cooperative subject to                    
             subchapter T.  See generally Buckeye Countrymark, Inc. v.                
             Commissioner, 103 T.C. 547, 554-563 (1994), for an overview              
             of the taxation of nonexempt cooperatives under subchapter               
             T.  The principal issue in this case is whether the gains                
             and losses that petitioner realized from the disposition                 
             of the property described above should be classified as                  
             patronage or nonpatronage gains and losses for purposes of               
             subchapter T.  The property at issue is petitioner’s stock               
             in three corporations, Terra, Mex-Am, Seaway, and certain                
             “property used in a trade or business”, as defined by                    
             section 1231(b), consisting of the assets of petitioner’s                
             Lamont gas plant, its soybean processing facilities, and                 
             miscellaneous business assets.  The bulk of the                          
             deficiencies determined in the notice of deficiency is                   
             attributable to respondent’s reclassification of the gain                
             from petitioner’s sale of the stock of Terra.                            
                  The term “patronage dividend” is defined by section                 
             1388(a) as follows:                                                      

                  (a) PATRONAGE DIVIDEND.--For purposes of this                       
                  subchapter, the term “patronage dividend” means                     
                  an amount paid to a patron by an organization to                    
                  which part I of this subchapter applies--                           
                            (1) on the basis of quantity or value                     
                       of business done with or for such patron,                      





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