Rev. Rul. 73-248
Rev. Rul. 73-248; 1973-1 C.B. 295
- Cross-Reference
26 CFR 1.521-1: Farmers' cooperative marketing and purchasing
associations; requirements for exemption under section 521.
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
Advice has been requested whether the farmers' cooperative, under the facts and circumstances described below, meets the "substantially all" test set forth in section 521(b)(2) of the Internal Revenue Code of 1954.
The pertinent facts of the farmers' cooperative with respect to the "substantially all" test are set forth in chart form below:
Shares of Capital Stock Total Shares
----------------------------- of
Patrons Producers Non-Producers Capital Stock
--------------------------------------------------------------------
A 5 5
B 10 10
C 10 10
D 15 15
E 10 10
F 50 50
-----------------------------------------------------
85 15 100
Section 521(b)(2) of the Code provides that exemption of a farmers' cooperative under section 521 of the Code shall not be denied because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorporation of eight percent per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substantially all such stock (other that nonvoting preferred stock, the owners of which are not entitled or permitted to participate directly or indirectly, in the profits of the association, upon dissolution or otherwise, beyond the fixed dividends) is owned by producers who market their products or purchase their supplies and equipment through the association.
In deciding whether a farmers' cooperative meets the "substantially all" test of section 521(b)(2) of the Code, all of the capital stock of the cooperative (other than nonvoting preferred) must be counted. Once all of the capital stock has been counted, at least 85 percent of such capital stock should be held by producers before it can be said that the "substantially all" test of section 521(b)(2) of the Code has been satisfied.
Accordingly, it is held that the farmers' cooperative in the instant case does satisfy the "substantially all" test of section 521(b)(2) of the Code.
- Cross-Reference
26 CFR 1.521-1: Farmers' cooperative marketing and purchasing
associations; requirements for exemption under section 521.
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
