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transaction to the cooperative enterprise. Respondent
argues that section 1.1382-3(c)(2), Income Tax Regs.,
establishes this per se nonpatronage rule for capital gains
and losses. The regulation provides as follows:
(2) Definition. As used in this paragraph, the
term “income derived from sources other than
patronage” means 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.
[Sec. 1.1382-3(c)(2), Income Tax Regs.]
This regulation is expressly applicable only to exempt
farmers' cooperatives. However, the concept “income
derived from sources other than patronage”, is a concept
applicable to both exempt and nonexempt cooperatives, and
the Courts have applied the regulation to nonexempt
cooperatives as well as to exempt cooperatives. See
Buckeye Countrymark, Inc. v. Commissioner, 103 T.C. at
547, 563 (1994); see also, e.g., CF Indus., Inc. v.
Commissioner, 995 F.2d 101, 102 (7th Cir. 1993), modifying
and affg. T.C. Memo. 1991-568; Cotter & Co. v. United
States, 765 F.2d 1102, 1106 (Fed. Cir. 1985); Certified
Grocers, Ltd. v. Commissioner, 88 T.C. 238, 244 n.13
(1987). But see Gold Kist, Inc. v. Commissioner, 104 T.C.
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