Farmland Industries, Inc. - Page 100




                                       - 95 -                                         
                  therefrom and then determining whether the income                   
                  or loss item in question was an unavoidable                         
                  result of transaction which was an integrally                       
                  necessary part of the regular course of those                       
                  activities.                                                         

             Under respondent’s new test, gain or loss from the sale of               
             an asset could never be classified as patronage income,                  
             unless the cooperative is in the trade or business of                    
             selling such assets.                                                     
                  We agree with respondent that the normal operating                  
             activities of a cooperative and the income realized                      
             therefrom should be taken into account in considering                    
             whether an item of income is patronage or nonpatronage.                  
             However, we do not believe that an item of income is                     
             automatically excluded from classification as patronage                  
             income if it does not match the customary operating income               
             of the cooperative.                                                      

             Gain from the Sale of Terra Stock and Losses from the                    
             Liquidation of Seaway and the Surrender of Mex-Am Stock                  
                  We disagree with respondent’s requested finding that                
             “the Terra, Seaway and Mex-Am, stock were investments.”                  
             From the facts discussed above, it is evident that the                   
             business of each of the three corporations in issue, Terra,              
             Seaway, and Mex-Am, was closely and directly related to                  
             petitioner’s cooperative business of supplying petroleum                 
             products to its patrons, and that the formation and                      





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Last modified: May 25, 2011