- 82 -
696, 717 n.26 (1995) (declining to apply sec. 1.1382-3(b),
Income Tax Regs., to a nonexempt cooperative), revd. on
other grounds 110 F.3d 769 (11th Cir. 1997).
Section 1.1382-3(c)(2), Income Tax Regs., defines
nonpatronage income as "incidental income derived from
sources not directly related to the marketing, purchasing,
or service activities of the cooperative association." The
regulation then gives three examples of nonpatronage income
derived from the lease of premises, from investment in
securities, and from the sale or exchange of capital
assets. See sec. 1.1382-3(c)(2), Income Tax Regs.
According to respondent, “by giving ‘income from the sale
or exchange of capital assets’ as an example of non-
patronage source income, Treas. Reg. section 1.1382-3(c)(2)
establishes a per se rule that the capital gains and losses
of a nonexempt cooperative are to be classified as non-
patronage source items.” We note that in considering this
regulation, the court in CF Indus., Inc. v. Commissioner,
supra at 106, described it as “hopelessly equivocal”.
Neither this nor any other court has ever held that
rents, dividends or interest income, or capital gains are
nonpatronage based upon a per se rule found in section
1.1382-3(c)(2), Income Tax Regs. See, e.g., CF Indus.,
Inc. v. Commissioner, supra (interest from short-term
Page: Previous 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 NextLast modified: May 25, 2011