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TITLE 26-INTERNAL REVENUE CODE (2) any corporation operating on a cooperat- ive basis other than an organization- (A) which is exempt from tax under this chapter, (B) which is subject to the provisions of- (i) part II of subchapter H (relating to mutual savings banks, etc.), or (it) subehapter L (relating to insurance companies), or (C) which is engaged in furnishing electric .energy, or providing telephone service, to persons in rural areas. (b) Tax on certain farmers' cooperatives An organization described in subsection (a)(1) shall be subject to the taxes imposed by section It or 1201. (Added Pub. L. 87-834, § 17(a), Oct. 16, 1962, 76 Stat. 1045.) EFFECTIVE DATE Section 17(c) of Pub. L. 87-834 provided that: "(1) For the cooperattves.-Except as provided in paragraph (3), the amendments made by subsections (a) and (b) [adding this subchapter, amending sections 521 and 6072 of this title, and repealing section 522 of this title] shall apply to taxable years of organizations described in section 1381(a) of the Internal Revenue Code of 1954 (as added by subsection (a)) [subsec. (a) of this section] beginning after December 31, 1962. "(2) For the patrons.-Except as provided in para- graph (3), section 1385 of the Internal Revenue Code of 1954 (as added by subsection (a)) [section 11.85 of this title] shall apply with respect to any amount re- ceived from any organization described in section 1381(a) of such Code (subsec. (a) of this section], to the extent that such amount Is paid by such organiza- tion in a taxable year of such organization beginning after December 31, 1962. "(3) Application of existing law.-In the case of any money, written notice of allocation, or other property paid by any organization described in section 1381(a) [subsec. (a) of this section]- "(A) before the first day of the first taxable year of such organization beginning after December 31, 1962, or "(B) on or after such first day with respect to pa- tronage occurring before such first day, the tax treatment of such money, written notice of al- location, or other property (including the tax treat- ment of gain or loss on the redemption, sale, or other disposition of such written notice of allocation) by any person shall be made under the Internal Revenue Code of 1954 [this title] without regard to subchapter T of chapter 1 of such Code [this subchapterl." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 46, 50B, 1382, 1385, 6044, 6072 of this title. § 1382. Taxable income of cooperatives (a) Gross income Except as provided in subsection (b), the gross income of any organization to which this part applies shall be determined without any adjustment (as a reduction in gross receipts, an increase in cost of goods sold, or otherwise) by reason of any allocation or distribution to a patron out of the net earnings of such organiza- tion or by reason of any amount paid to a patron as a per-unit retain allocation (as de- fined in section 1388(f)). (b) Patronage dividends and per-unit retain alloca- tions In determining the taxable income of an or- ganization to which this part applies, there shall not be taken into account amounts paid during the payment period for the taxable year- (1) as patronage dividends (as defined in section 1388(a)), to the extent paid in money, qualified written notices of allocation (as de- fined in section 1388(c)), or other property (except nonqualified written notices of alloca- tion (as defined in section 1388(d))) with re- spect to patronage occurring during such tax- able year; (2) in money or other property (except writ- ten notices of allocation) in redemption of a nonqualified written notice of allocation which was paid as a patronage dividend during the payment period for the taxable year during which the patronage occurred; (3) as per-unit retain allocations (as defined in section 1388(f)), to the extent paid in money, qualified per-unit retain certificates (as defined in section 1388(h)), or other prop- erty (except nonqualified per-unit retain cer- tificates, as defined in section 1388(i)) with re- spect to marketing occurring during such tax- able year; or (4) in money or other property (except per- unit retain certificates) in redemption of a nonqualified per-unit retain certificate which was paid as a per-unit retain allocation during the payment period for the taxable year during which the marketing occurred. For purposes of this title, any amount not taken into account under the preceding sen- tence shall, in the case of an amount described in paragraph (1) or (2), be treated in the same manner as an item of gross income and as a de- duction therefrom, and in the case of an amount described in paragraph (3) or (4), be treated as a deduction in arriving at gross income. I (c) Deduction for nonpatronage distributions, etc. In determining the taxable income of an or- ganization described in section 1381(a)(0), there shall be allowed as a deduction (in addl' ion to other deductions allowable uner this chap- ter)- (1) amounts paid during the taxable year as dividends on its capital stock; and (2) amounts paid during the payment period for the taxable year- (A) in money, qualified written notices of allocation, or other property (except non- qualified written notices of allocation) on a patronage basis to patrons with respect to its earnings during such taxable year which are derived from business done for the United States or any of its agencies or from sources other than patronage, or (B) in money or other property (.except written notices of allocation) in redemption of a nonqualified written notice of alloca- tion which was paid, during the payment period for the taxable year during which the earnings were derived, on a patronage basis to a patron with respect to earnings derived from business or sources described in subparagraph (A). 71-999 0 - 78 - 49 (Vol, 7) Page 741 § 1382