1048
PUBLIC LAW 87-834-OCT. 16, 1962
[76 STAT.
- TART II—TAX TREATMENT BY PATRONS OF PATRONAGE DIVIDENDS
Sec. 1385. Amounts includible in patron's gross income. "SEC. 1385. AMOUNTS INCLUDIBLE IN PATRON'S GROSS INCOME. " (a) GENERAL RULE.—Except as otherwise provided in subsection
Ante, p. 1045. Ante, p. 1046.
(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), and " (2) any amouut, 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). " (b) EXCLUSION FROM GROSS INCOME.—Under regulations prescribed by the Secretary or his delegate, 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.— "(1) APPLICATION or SUBSECTION.—This subsection shall apply
to any nonqualified written notice of allocation which— " (A) was paid as a patronage dividend, or " (B) 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). "(2) B A S I S; AMOUNT or GAIN.—In the case of any nonqualified written notice of allocation to which this subsection applies, for purposes of this chapter— " (A) the basis of such written notice of allocation in the hands of the patron to whom such written notice of allocation was paid shall be zero, " (B) the basis of such written notice of allocation 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 by any person shall, to the extent that the stated dollar amount of such written notice of allocation exceeds its basis, be considered as gain from the sale or exchange of property which is not a capital asset.
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