- 12 - Respondent’s Adjustments Respondent attached to the notice of deficiency an explanation of his adjustments to petitioner’s tax liabilities for the audit years. The explanation states that respondent has determined that “the food show distributions” to petitioner’s shareholders are both income to petitioner and nondeductible patronage dividends paid by it to its members. Therefore, the explanation continues, petitioner’s taxable income is increased by $421,973, $489,685, and $144,122, for 1991, 1992, and 1993, respectively. OPINION I. Introduction During the audit years, petitioner, a wholesale food purchasing cooperative, conducted one or more food shows a year at which member stores met with vendors. Among other things, the food shows were designed to encourage member stores to order from petitioner the vendors’ products offered at the shows. Pursuant to an agreement with petitioner, each vendor attending a show was required to offer member stores special show discounts on the vendor’s products offered at the show. Petitioner referred to those special show discounts as “show money”. Vendors could make show money available to member stores in one of two ways. First, a vendor could offer a member store a discount on an order placed with petitioner at the show, petitioner having agreed to honorPage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 NextLast modified: November 10, 2007