Sec. 1385. Amounts includible in patron's gross income
TITLE 26,
Subtitle A,
CHAPTER 1,
Subchapter T,
PART II,
Sec. 1385
STATUTE
- (a)
- General rule
Except as otherwise provided in subsection (b), each person shall
include in gross income -
- (1)
- the amount of any patronage dividend which is paid in
money, a qualified written notice of allocation, or other
property (except a nonqualified written notice of allocation),
and which is received by him during the taxable year from an
organization described in section 1381(a),
- (2)
- any amount, described in section 1382 (c)(2)(A) (relating
to certain nonpatronage distributions by tax-exempt farmers'
cooperatives), which is paid in money, a qualified written notice
of allocation, or other property (except a nonqualified written
notice of allocation), and which is received by him during the
taxable year from an organization described in section
1381(a)(1), and
- (3)
- the amount of any per-unit retain allocation which is paid
in qualified per-unit retain certificates and which is received
by him during the taxable year from an organization described in
section 1381(a).
- (b)
- Exclusion from gross income
Under regulations prescribed by the Secretary, the amount of any
patronage dividend, and any amount received on the redemption,
sale, or other disposition of a nonqualified written notice of
allocation which was paid as a patronage dividend, shall not be
included in gross income to the extent that such amount -
- (1)
- is properly taken into account as an adjustment to basis of
property, or
- (2)
- is attributable to personal, living, or family items.
- (c)
- Treatment of certain nonqualified written notices of allocation
and certain nonqualified per-unit retain certificates
- (1)
- Application of subsection
This subsection shall apply to -
- (A)
- any nonqualified written notice of allocation which -
- (i)
- was paid as a patronage dividend, or
- (ii)
- was paid by an organization described in section
1381(a)(1) on a patronage basis with respect to earnings
derived from business or sources described in section
1382(c)(2)(A), and
- (B)
- any nonqualified per-unit retain certificate which was
paid as a per-unit retain allocation.
- (2)
- Basis; amount of gain
In the case of any nonqualified written notice of allocation or
nonqualified per-unit retain certificate to which this subsection
applies, for purposes of this chapter -
- (A)
- the basis of such written notice of allocation or
per-unit retain certificate in the hands of the patron to whom
such written notice of allocation or per-unit retain
certificate was paid shall be zero,
- (B)
- the basis of such written notice of allocation or
per-unit retain certificate which was acquired from a decedent
shall be its basis in the hands of the decedent, and
- (C)
- gain on the redemption, sale, or other disposition of
such written notice of allocation or per-unit retain
certificate by any person shall, to the extent that the stated
dollar amount of such written notice of allocation or per-unit
retain certificate exceeds its basis, be considered as ordinary
income.
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1388 of this title.
SOURCE
AMENDMENTS
EFFECTIVE DATE OF 1976 AMENDMENT
EFFECTIVE DATE OF 1966 AMENDMENT
EFFECTIVE DATE
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