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If the cooperative must change their

Rev. Proc. 2004-34, 2004-22 I.R.B.

complete Form 990-C, Schedule A, on

originally filed return for any year, it

991.

page 2. See the Schedule A

should file a new return including any

instructions.

Allocation of patronage and

required attachments. Use the revision

nonpatronage income and

Line 4a. Income from

of Form 990-C applicable to the year

deductions (Form 8817). Certain

being amended. The amended return

Patronage Dividends and

cooperatives that have gross receipts of

must provide all the information called

$10 million or more and have

Per-unit Retain Allocations

for by the form and instructions, not just

patronage and nonpatronage source

the new or corrected information.

Attach a schedule listing the name of

income and deductions must complete

Check the “Amended return” box.

each declaring association from which

and attach Form 8817, Allocation of

the cooperative received income from

Patronage and Nonpatronage Income

Note. If a change in address occurs

patronage dividends and per-unit retain

and Deductions, to their return.

after the return is filed, use Form 8822,

allocations, and the total amount

Change of Address, to notify the IRS of

Installment sales. Generally, the

received from each association.

the new address.

installment method cannot be used for

dealer dispositions of property. A

Include the items listed below:

Income

“dealer disposition” is any disposition

1. Patronage dividends received in:

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of: (a) personal property by a person

Except as otherwise provided in the

Money,

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who regularly sells or otherwise

Internal Revenue Code, gross income

Qualified written notices of

disposes of personal property of the

allocation, or

includes all income from whatever

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same type on the installment plan or (b)

Other property (except

source derived.

real property held for sale to customers

nonqualified written notices of

Extraterritorial income. Gross income

in the ordinary course of the taxpayer’s

allocation).

generally does not include

trade or business.

2. Nonpatronage distributions

extraterritorial income that is qualifying

received on a patronage basis from

These restrictions on using the

foreign trade income. The

tax-exempt farmers’ cooperatives in:

installment method do not apply to

extraterritorial income exclusion is

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Money,

dispositions of property used or

reduced by 20% for transactions in

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produced in a farming business or sales

Qualified written notices of

2005 (40% for transactions in 2006),

of timeshares and residential lots for

allocation, or

unless made under a binding contract

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which the cooperative elects to pay

Other property (except

with an unrelated person in effect on

interest under section 453(I)(3).

nonqualified written notices of

September 17, 2003, and at all times

allocation), based on earnings of that

thereafter. Use Form 8873,

For sales of timeshares and

cooperative either from business done

Extraterritorial Income Exclusion, to

residential lots reported under the

with or for the United States or any of

figure the exclusion. Include the

installment method, the cooperative’s

its agencies (or from sources other than

exclusion in the total for Other

income tax is increased by the interest

patronage, such as investment

deductions on line 26, Form 990-C.

payable under section 453(l)(3). To

income).

report this addition to tax, see the

Income from qualifying shipping

3. Qualified written notices of

instructions for Schedule J, line 9, on

activities. Gross income does not

allocation at their stated dollar amounts

page 18.

include income from qualifying shipping

and property at its fair market value

activities if the cooperative makes an

Enter on line 1 (and carry to line 3),

(FMV).

election under section 1354 to be taxed

the gross profit on collections from

4. Amounts received on the

on its notional shipping income (as

installment sales for any of the

redemption, sale, or other disposition of

defined in section 1353) at the highest

following:

nonqualified written notices of

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corporate rate (35%). If the election is

Dealer dispositions of property before

allocation.

made, the cooperative generally may

March 1, 1986.

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Generally, patronage dividends from

not claim any loss, deduction, or credit

Dispositions of property used or

purchases of capital assets or

with respect to qualifying shipping

produced in the trade or business of

depreciable property are not includible

activities. A cooperative making this

farming.

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in income but must be used to reduce

election also may elect to defer gain on

Certain dispositions of timeshares

the basis of the assets. See section

the disposition of a qualifying vessel.

and residential lots reported under the

1385(b) and the related regulations.

installment method.

Use Form 8902, Alternative Tax on

5. Amounts received (or the stated

Qualifying Shipping Activities, to figure

Attach a schedule showing the

dollar value of qualified per-unit retain

the tax. Include the alternative tax on

following information for the current and

certificates received) from the sale or

Schedule J, line 9.

the 3 preceding years: (a) gross sales,

redemption of nonqualified per-unit

(b) cost of goods sold, (c) gross profits,

retain certificates.

Line 1. Gross Receipts or

(d) percentage of gross profits to gross

6. Per-unit retain allocations

Sales

sales, (e) amount collected, and (f)

received (except nonqualified per-unit

gross profit on the amount collected.

retain certificates). See section 1385.

Enter gross receipts or sales from all

Nonaccrual experience method.

business operations except those that

Cooperatives that qualify to use the

must be reported on lines 4a through

Payments from the Commodity

nonaccrual experience method should

10. In general, advance payments are

Credit Corporation to a farmers’

attach a schedule showing total gross

reported in the year of receipt. To

cooperative for certain expenses of the

receipts, the amount not accrued as a

report income from long-term contracts,

co-op’s farmers-producers under a

result of the application of section

see section 460. For special rules for

“reseal” program of the U.S.

448(d)(5), and the net amount accrued.

reporting certain advance payments for

Department of Agriculture are

Enter the net amount on line 1a.

goods and long-term contracts, see

patronage-source income that may give

Regulations section 1.451-5. For

rise to patronage dividends under

Line 2. Cost of Goods Sold

permissible methods for reporting

section 1382(b)(1). See Rev. Rul.

certain advance payments for services

Enter the cost of goods sold on line 2,

89-97, 1989-2 C.B. 217, for more

by an accrual method cooperative, see

page 1. Before making this entry,

information.

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2005 Page 6

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