The IRS today publicly released a private letter ruling* that concludes that a cooperative’s proposed distribution of a percentage of gain realized on the sale of land by the cooperative to its member-patrons is patronage-sourced income and is eligible to be deducted as a patronage dividend.
Read PLR 202035006 [PDF 89 KB] (release date August 28, 2020, and dated May 26, 2020)
*Private letter rulings are taxpayer-specific rulings furnished by the IRS Office of Chief Counsel in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. Pursuant to section 6110(k)(3), written determinations such as private letter rulings are not intended to be relied upon by third parties and may not be cited as precedent. These written determinations may, however, offer an indication of the IRS’s position on the issues addressed.
The cooperative—a non-exempt agricultural cooperative corporation that provides processing and marketing services for the agricultural products of its members-patrons—files a consolidated federal income tax return using a December 31 year-end and the accrual method of accounting. The cooperative’s bylaws require it to allocate patronage earnings among its member-patrons on a patronage basis.
The IRS ruled that:
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni | +1 (267) 256-1627 | firstname.lastname@example.org
Associate National Director of KPMG’s Cooperative Tax Services:
Brett Huston | +1 (916) 554-1654 | email@example.com
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