Income From Cooperatives If you buy farm supplies through a cooperative, you may receiveincome from the cooperative in the form of patronage dividends(distributions). If you sell your farm products through a cooperative,you may receive patronage dividends or a per-unit retain certificate,explained later, from the cooperative. Form 1099-PATR.The cooperative will report the income to you on Form1099-PATR or a similar form and send a copy to the IRS. Form1099-PATR may also show an alternative minimum tax adjustmentthat you must include if you are required to file Form 6251,alberghi soggiorno Porto countryAlternative Minimum Tax--Individuals. Patronage Dividends (Distributions) You generally report patronage dividends you receive as income onlines 5a and 5b of Schedule F for the tax year you receive them. Theyinclude the following items. Money paid as a patronage dividend. The stated dollar value of qualified written notices ofallocation. The fair market value of other property. Qualified written notice of allocation.A qualified written notice of allocation is taxable at its stateddollar value in the year received. To be qualified, it must be paid aspart of a patronage dividend, or a payment by a cooperative, in which20% or more of the dividend or payment is paid in money or a qualifiedcheck. It must also meet one of the following conditions. It must be redeemable in cash for at least 90 days after itis issued, and you must have received a written notice of your rightof redemption at the same time as the written notice ofallocation. You must have agreed to include the stated dollar value inincome in the year you receive the notice by doing one of thefollowing. hotel rooms EsbjergSigning and giving a written agreement to thecooperative. Getting or keeping membership in the cooperative after itadopted a bylaw providing that membership constitutes agreement. Thecooperative must notify you in writing of this bylaw and give you acopy. Endorsing and cashing a qualified check, paid as part of thewritten notice of allocation, by the 90th day after the close of thepayment period for the tax year of the cooperative. Loss on redemption.You can deduct in Part II of Schedule F any loss incurred on theredemption of a qualified written notice of allocation you received inthe ordinary course of your farming business. The loss is thedifference between the stated dollar amount of the qualified writtennotice you included in income and the amount you received when youredeemed it. Nonqualified notices of allocation.Any written notices of allocation that do not meet the conditionsexplained earlier under Qualified written notice of allocationare nonqualified notices. Do not include the stated dollar valueof nonqualified notices in income when you receive them. Your basis ina nonqualified notice of allocation is zero. You must include inincome for the tax year of disposition any amount you receive from thesale, redemption, or other disposition of a nonqualified writtennotice. Include it, up to the stated dollar value of the notice, asordinary income in Part I of Schedule F. You must include any amountthat is more than the stated dollar value as the type of income itrepresents. For example, if it represents interest income, include iton your return as interest. Purchase of depreciable property or capital assets.Do not include in income dividends from the purchase of capitalassets or depreciable property used in your business. You must,however, reduce the basis of these assets by the dividends. If thedividends are more than your unrecovered cost, include the differenceas ordinary income on Schedule F for the tax year you receive them.Include all these dividends on line 5a of Schedule F, but include onlythe taxable part on line 5b. Example.On July 1, 1998, Mr. Brown, a patron of a cooperative association,bought a machine for his dairy farm business from the association for$2,900. The machine has a life of 7 years under MACRS (as provided inthe Table of Class Lives and Recovery Periods inPublication 946).Mr. Brown files his return on a calendar year basis.For 1998, he claimed a depreciation deduction of $311, using the10.71% depreciation rate from the 150% declining balance, half-yearconvention table (shown in Table A-14 in Appendix Aof Publication 946).On July 1, 1999, the cooperative association paidMr. Brown a $300 cash patronage dividend for his purchase of themachine. Mr. Brown adjusts the basis of the machine and figures hisdepreciation deduction for 1999 (and later years) as follows. Cost of machine on July 1, 1998 $2,900 Minus: 1998 depreciation $311 1999 cash dividend        300        611 Adjusted basis for depreciation for 1999:     $2,289 Depreciation rate: 1 6 1/2(remaining recovery period as of 1/1/99) = 15.38% 1.5 =23.08% Depreciation deduction for 1999($2,289 23.08%)       $528 Exceptions.If the dividends come from the selling or buying of capital assetsor depreciable property used in your business and you did not own theproperty at any time during the year you received them, you mustinclude the dividends in income unless one of the following twoexceptions applies. If the dividends relate to a capital asset you held for morethan 1 year for which a loss was or would have been deductible, treatthem as gain from the sale or exchange of a capital asset held formore than 1 year. If the dividends relate to a capital asset for which a losswas not or would not have been deductible, do not report them asincome (ordinary or capital gain). If you receive a dividend from selling a capital asset ordepreciable property used in your business in the same year the assetwas sold, treat it as an additional amount received on the sale orother disposition of the asset. If you cannot determine from which item the dividend comes, includethe dividend in income as ordinary income. Personal purchases.Omit from the taxable amount of patronage dividends on line 5b ofSchedule F any dividends from buying personal, living, or familyitems, such as supplies, equipment, or services not related to theproduction of farm income. This rule also applies to amounts from thesale, redemption, or other disposition of a nonqualified writtennotice of allocation resulting from these purchases. Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows thestated dollar amount of a per-unit retain allocation made to you bythe cooperative. A per-unit retain allocation is an amount paid topatrons for products sold for them that is fixed without regard to thenet earnings of the cooperative. These allocations can be paid inmoney, other property, or qualified certificates. Per-unit retain certificates issued by a cooperative generallyreceive the same tax treatment as patronage dividends, discussedearlier. Qualified certificates.Qualified per-unit retain certificates are those issued to patronswho have agreed in writing, or in effect have agreed by getting orkeeping membership in a cooperative whose bylaws or charter state thatmembership constitutes agreement, to include the stated dollar amountof these certificates in income in the year of receipt. If you receivequalified per-unit retain certificates, include the stated dollaramount of the certificates in income in Part I of Schedule F for thetax year you receive them. Nonqualified certificates.All other per-unit retain certificates are nonqualifiedcertificates. Do not include the stated dollar value of a nonqualifiedcertificate in income when you receive it. Your basis in thecertificate is zero. You must include in income any amount you receivefrom its sale, redemption, or other disposition. Report the amount youreceive as ordinary income in Part I of Schedule F for the tax year ofdisposition.