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(sections 1381 through 1383) of subchapter T, which addresses the
tax treatment of cooperatives.
At the end of its fiscal year, petitioner returns the
profits from its wholesale grocery purchasing business to its
shareholder-patrons as patronage dividends.
Member Stores
Member stores determine independently of petitioner the
types, brands, and quantities of the commodities that they
purchase for resale to customers.
Promotional Allowance Accounts
From time to time, petitioner receives from some vendors and
vendor representatives (without distinction, vendors)2 funds to
be spent in promoting the sale of products offered by those
vendors. Petitioner deposits the funds in its own bank account
and, on its books, treats the deposits as liabilities owed to the
contributing vendors. Petitioner identifies the balance on hand
for each contributing vendor in a set of accounts that it has
designated the “promotional allowance accounts” (promotional
allowance accounts).
2 The parties have stipulated that the term “vendor
representative” refers to an individual or entity who solicits
and concludes sales of food and food products to petitioner and
member stores on behalf of vendors, including all independent
distributors, brokers, sales representatives, and agents of
vendors. We shall adopt that locution for purposes of this
report.
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Last modified: November 10, 2007