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additional UMAs, thereby obligating themselves to produce greater
quantities of corn to MCP each year. Petitioners’ argument
regarding control fails to adequately acknowledge petitioners’
expanding role as dealers who bought and sold corn to customers
for a profit.
The second reason is grounded in the unique nature of a
cooperative and its relationship to its members. In Puget Sound
Plywood, Inc. v. Commissioner, 44 T.C. 305, 306-309 (1965), we
examined the nature and attributes of a cooperative in general in
order to decide whether a workers cooperative association was a
nonexempt cooperative association entitled to exclude patronage
distributions from its gross income for Federal income tax
purposes. In so doing, we quoted the following description of a
cooperative contained in 7 Ency. Am. 639 (1959):
“A cooperative is an organization established by
individuals to provide themselves with goods and
services or to produce and dispose of the products of
their labor. The means of production and distribution
are those owned in common and the earnings revert to
the members, not on the basis of their investment in
the enterprise but in proportion to their patronage or
personal participation in it. Cooperatives may be
divided roughly into consumer cooperatives and producer
cooperatives.
* * * * * * *
Producer [cooperative] organizations operate for the
benefit of the members in their capacity as producers.
Their function may be either the marketing or
processing of goods produced individually (as in
fishermen’s or farmers’ marketing associations, or
associations which make butter or cheese from farm
products received from farm members), or the marketing
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