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of goods processed or produced collectively (as in the
so-called workers’ [cooperative] productive
associations operating factories or mills).” [Emphasis
supplied.]
Puget Sound Plywood, Inc. v. Commissioner, supra at 306-307.
We noted that three fundamental principles underlie a
cooperative: (1) Subordination of capital; (2) democratic control
by the cooperative’s members; and (3) the allocation among
members of the economic results in proportion to the members’
active participation in the cooperative endeavor. Id. at 308.
Regarding the second element, we stated that a cooperative
effects democratic control by requiring the members to
“periodically assemble in democratically conducted meetings at
which each member has one vote and one vote only, and at which no
proxy voting is permitted; and these * * * [members] there deal
personally with all problems affecting the conduct of the
cooperative.” Id.
MCP was an agricultural cooperative characterized by
subordination of capital, democratic control by its members,14
and the distribution of its operational proceeds on the basis of
patronage. MCP’s bylaws confirm that members had substantial
control over its operations. Moreover, petitioners failed to
introduce evidence to support a finding that, as cooperative
14Under MCP’s articles of incorporation, each MCP member was
entitled “to only one vote on each matter submitted to a vote at
any meeting of the members regardless of the number of shares of
common stock held by such member.”
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