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and sale of plywood and related wood products. The
taxpayer in each ruling owned standing timber which had
appreciated in value and served as a source of raw material
for the taxpayer's products. The issue was whether the
capital gains recognized by each cooperative upon cutting
the timber, pursuant to an election under section 631(a),
could be classified as patronage income. Section 631(a)
provides an election to certain taxpayers to treat, as gain
or loss from a sale or exchange under section 1231, the
difference between the actual cost or other basis of the
timber cut during the year and its fair market value as
standing timber. See sec. 1.631-1(a), Income Tax Regs.
In each ruling, the Commissioner took the position that the
capital gains recognized by the cooperative are properly
classified as patronage income.
The classification of capital gains realized pursuant
to the election under section 631(a) as patronage income
was tacitly approved by this Court in Stevenson Co-Ply,
Inc. v. Commissioner, 76 T.C. 637 (1981). That case
involved a dispute concerning the computation of the
alternative tax under section 1201(a) with respect to
section 631(a) gains. We held that, for purposes of
computing the alternative tax, a taxpayer is entitled to
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