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cf. Land O'Lakes, Inc. v. United States, supra at 993.
In Rev. Rul. 69-576, supra, the Commissioner held that an
amount received by the taxpayer, a nonexempt cooperative,
as a patronage dividend from a bank for cooperatives should
be considered patronage income in the taxpayer's hands.
The taxpayer cooperative became eligible to receive the
patronage dividend from the bank for cooperatives by reason
of the fact that it had borrowed from the bank to finance
the acquisition of agricultural supplies for resale to its
members. The Commissioner reviewed section 1.1382-3(c)(2),
Income Tax Regs., and articulated the following test for
classifying an item of income as patronage or nonpatronage
income:
Section 1.1382-3(c)(2) of the Income Tax
Regulations defines the term “income derived
from sources other than patronage” to mean
incidental income derived from sources not
directly related to the marketing, purchasing,
or service activities of the cooperative
association. For example, income derived
from the lease of premises, from investment
in securities, or from the sale or exchange
of capital assets, constitutes income derived
from sources other than patronage.
The classification of an item of income as
from either patronage or nonpatronage sources
is dependent on the relationship of the activity
generating the income to the marketing, purchas-
ing, or service activities of the cooperative.
If the income is produced by a transaction which
actually facilitates the accomplishment of the
cooperative's marketing, purchasing, or service
activities, the income is from patronage sources.
However, if the transaction producing the income
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