Looking for a Form 990-c Templates? Download it for free!

•

Other property (except nonqualified

1. Out of earnings not from business

Line 1. Enter the amount actually or

written notices of allocation).

done with or for patrons;

constructively paid as dividends during

A written notice of allocation means:

2. Out of earnings from business done

the tax year on:

•

Any capital stock,

with or for other patrons to whom no

Common stock (whether voting or

•

Revolving fund certificate,

amounts or smaller amounts are paid for

nonvoting),

•

Retain certificate,

substantially identical transactions;

Preferred stock,

•

Certificate of indebtedness,

3. To redeem capital stock,

Capital retain certificates,

•

Letter of advice, or

certificates of indebtedness, revolving

Revolving fund certificates,

•

Other written notice, which states the

fund certificates, retain certificates, letters

Letters of advice, or

•

dollar amount allocated to the patron by

of advice, or other similar documents; or

Other documentary evidence of a

the cooperative and the part, if any, which

4. Without reference to the net

proprietary interest in the cooperative

is a patronage dividend.

earnings of the cooperative organization

association.

In general, a qualified written notice

from business done with or for its patrons.

See Regulations section 1.1382-3(b)

of allocation is a written notice of

for more information.

allocation that is:

Line 2. Enter amounts paid on a

•

Paid as part of a patronage dividend in

Schedule J

patronage basis to patrons from

money or by qualified check equal to at

nonpatronage income. Payment may be

least 20% of the patronage dividend and

Tax Computation

in:

•

One of the following conditions is met:

Money,

•

Lines 1 and 2

1. The patron must have at least 90

Qualified written notices of allocation,

days from the date the written notice of

Members of a controlled group. A

•

allocation is paid to redeem it in cash,

Other property (except nonqualified

member of a controlled group, as defined

and must receive written notice of the

written notices of allocation).

in section 1563, must check the box on

right of redemption at the time the patron

The amounts must be paid during the

line 1 and complete lines 2a and 2b of

receives the allocation; or

payment period that begins on the first

Schedule J.

2. The patron must agree to have the

day of the tax year and ends on the 15th

Line 2a. Members of a controlled group

allocation treated as constructively

day of the 9th month after the end of the

are entitled to share one $50,000, one

received and reinvested in the

tax year in which the income was earned.

$25,000, and one $9,925,000 taxable

cooperative. See section 1388(c)(2) and

Nonpatronage income includes

income bracket amount (in that order) on

related regulations for information on how

incidental income from sources not

line 2a.

the consent must be made.

directly related to:

•

When a controlled group adopts or

Marketing,

If a written notice of allocation does not

•

later amends an apportionment plan,

Purchasing,

qualify, no deduction is allowable at the

•

each member must attach to its tax return

Service activities of the cooperative

time it is issued. However, the

a copy of its consent to this plan.

(such as income from the lease of

cooperative is entitled to a deduction or

The copy (or an attached statement)

premises, investments, or from the sale or

refund of tax when the nonqualified

must show the part of the amount in each

exchange of capital assets), or

written notice of allocation is finally

•

taxable income bracket apportioned to

Income from business done with or for

redeemed, if that notice was paid as a

that member. See Regulations section

the U.S. Government, or any of its

patronage dividend during the payment

1.1561-3(b) for other requirements and

agencies.

period for the tax year during which the

for the time and manner of making the

See Patronage dividends below for a

patronage occurred. The deduction or

consent.

definition of “qualified written notice of

refund is allowed, but only to the extent

allocation.” See section 1382(c)(2)(B) for

that amounts paid to redeem the

Equal apportionment plan. If no

deductibility of amounts paid in

nonqualified written notice of allocation

apportionment plan is adopted, members

redemption of nonqualified written notices

are paid in money or other property (other

of a controlled group must divide the

of allocation.

than written notices of allocation). They

amount in each taxable income bracket

cannot be more than the stated dollar

equally among themselves. For example,

Line 3. To be deductible, patronage

amounts of the nonqualified written notice

Controlled Group AB consists of

dividends must be paid during the

of allocation. See section 1382(b) and

Cooperative A and Cooperative B. They

payment period that begins on the first

related regulations.

do not elect an apportionment plan.

day of the tax year in which the patronage

Therefore, each cooperative is entitled to:

occurs and ends on the 15th day of the

See Rev. Rul. 81-103, 1981-1 C.B.

•

$25,000 (one-half of $50,000) on line

9th month after the end of that tax year.

447, for the redemption of nonqualified

2a(1),

See sections 1382(e) and (f) for

written notices of allocation issued to

•

$12,500 (one-half of $25,000) on line

special rules for the time when patronage

patrons by a payment of cash and a

2a(2), and

occurs if products are marketed under a

crediting of accounts receivable due from

•

$4,962,500 (one-half of $9,925,000) on

pooling arrangement, or if earnings are

patrons.

line 2a(3).

includible in the gross income of the

Note. See section 1383 for special rules

Unequal apportionment plan. Members

cooperative for a tax year after the year in

for figuring the cooperative’s tax in the

of a controlled group may elect an

which the patronage occurred.

year nonqualified written notices of

unequal apportionment plan and divide

Patronage dividends include any

allocation are redeemed. The cooperative

the taxable income brackets as they want.

amount paid to a patron by a cooperative

is entitled to:

There is no need for consistency among

based on the quality or value of business

taxable income brackets. Any member

(a) A deduction in the tax year the

done with or for that patron under a

may be entitled to all, some, or none of

nonqualified written notices of allocation

pre-existing obligation of the cooperative

the taxable income bracket. However, the

are redeemed (if permitted under section

to pay that amount.

total amount for all members cannot be

1382(b)(2) or (4) or section 1382(c)(2)(B))

The amount is determined by

more than the total amount in each

reference to the net earnings of the

taxable income bracket.

(b) A tax credit based on a

organization from business done with or

Line 2b. Members of a controlled group

recomputation of tax for the year(s) the

for its patrons.

are treated as one group to figure the

nonqualified written notices of allocation

Patronage dividends may be in:

applicability of the additional 5% tax and

•

were issued. See instructions for line 32f.

Money,

the additional 3% tax. If an additional tax

•

Qualified written notices of allocation,

Amounts paid to patrons are not

applies, each member will pay that tax

patronage dividends if paid:

based on the part of the amount used in

-15-

Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - 2001 Page 15

Related Articles

Related forms

Related Categories