- 38 -
United States v. Miss. Chem. Co., 326 F.2d at 573 (citing Midland
Coop. Wholesale Oil Association v. Commissioner, 44 B.T.A. 824
(1941), for the stated proposition).
The legislative history of the 1962 Act indicates that, in
providing a statutory deduction for patronage dividends, the tax-
writing committees of Congress had in mind the price adjustment
theory. S. Rept. 1881, 87th Cong., 2d Sess. (1962), 1962-3 C.B.
707, 822 (“patronage dividends represent price adjustments”); H.
Rept. 1447, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 405, 485-486
(similar).
d. The Price Adjustment Theory Has Its Limits
An examination of the limited caselaw on the subject and
scholarly and other authoritative writings convinces us that,
although the Federal income tax treatment of patronage dividends
may rest substantially on the price adjustment theory, a price
adjustment made by a cooperative may reduce its gross income even
if the adjustment does not qualify as a patronage dividend.
It has long been understood that the distinguishing
characteristic of a cooperative enterprise is the obligation of
the enterprise to distribute what may be called its “excess
receipts” (or “net margins”) on a patronage basis. See Packel,
Law of Cooperatives 248–249 (3d ed. 1956). While there is some
question as to whether, with regard to a cooperative enterprise,
the concept of profit is appropriate (since the enterprise is run
Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Next
Last modified: November 10, 2007