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does not actually facilitate the accomplishment
of these activities but merely enhances the
overall profitability of the cooperative, being
merely incidental to the association's
cooperative operation, the income is from
nonpatronage sources.
Accordingly, inasmuch as the income received
by the nonexempt cooperative from the bank for
cooperatives resulted from a transaction that
financed the acquisition of agricultural supplies
which were sold to its members, thereby directly
facilitating the accomplishment of the
cooperative's purchasing activities, it is held
that the allocation and payment of this same
amount by the nonexempt farmers' cooperative to
its own patrons (farmers) qualifies as a
patronage dividend. * * * [Rev. Rul. 69-576,
supra.]
Similarly, in Rev. Rul. 74-160, 1974-1 C.B. 245, the
Commissioner ruled that interest income realized from loans
made by the taxpayer, a nonexempt cooperative engaged in
the manufacture and sale of plywood, to the taxpayer's
chief supplier was patronage income. According to the
ruling, the loans were necessary in order to permit the
supplier to finance equipment needed to carry on its
business operations and, without the loans, the supplier
would have been unable to supply the taxpayer. Thus, the
Commissioner ruled that the interest income paid by the
supplier to the taxpayer was classified as patronage income
because it “actually facilitated the accomplishment of
taxpayer's cooperative activities, in that it enabled the
taxpayer to obtain necessary supplies for its operations.”
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