*230 Determination made as to the right of petitioner, a non-tax-exempt farmers' cooperative association, to exclude from its gross income as part of its patronage dividends, certain amounts allocated for the benefit of its members only, out of compensation received from the Commodity Credit Corporation (a government agency which was not a member of petitioner cooperative), for services in handing and storing grain owned by such agency. Pomeroy Cooperative Grain Co., 31 T.C. -, (Dec. 31, 1958), followed.
Memorandum Findings of Fact and Opinion
PIERCE, Judge: Respondent determined deficiencies in petitioner's income taxes as follows:
| Year ended | Deficiency |
| June 30, 1953 | $1,181.29 |
| June 30, 1954 | 7,446.93 |
| June 30, 1955 | 7,350.63 |
*231 The issue presented for decision is whether the petitioner, a non-tax-exempt farmers' cooperative association, is entitled to exclude from its gross income, as part of its patronage dividends (designated on its returns as "Patronage Refunds"), amounts allocated for credit and subsequent distribution to its members only, out of compensation received by petitioner from the Commodity Credit Corporation (a government agency which was not a member of the cooperative), for handling and storing grain which producers of such grain (including both members and nonmembers of the cooperative) had surrendered to such government agency at petitioner's elevator, in satisfaction of government corp loans.
All other issues raised in the pleadings were abandoned by petitioner at the trial.
Findings of Fact
Some of the facts were stipulated; and it was stipulated also that certain exhibits and all oral testimony relating thereto, previously received in evidence in the case of Pomeroy Cooperative Grain Co., 31 T.C. - (Dec. 31, 1958), are incorporated herein and may be considered by this Court in rendering its opinion in the instant case. The stipulation, together with all exhibits identified therein, *232 is incorporated herein by reference.
The petitioner, Superior Cooperative Elevator Company, is an Iowa corporation which has its principal place of business at Superior, Iowa. During all the taxable years, it qualified and was operated as a farmers' "cooperative association" under Chapter 499 of the Codes of Iowa, 1950 and 1954. It did not qualify (which it has conceded) as a tax-exempt cooperative, under section 101(12) of the Internal Revenue Code of 1939 or under section 521 of the Internal Revenue Code of 1954. It kept its books of account on an accrual basis, for fiscal years ended June 30. Its returns for all the taxable years were filed with the district director of internal revenue for the district of Iowa.
Petitioner is a purchasing and marketing cooperative, dealing in grain and farm supplies. These business activities were carried on through two departments, known respectively as the Grain and Merchandise Departments. Its activities in connection with the marketing of grain purchased from its patrons, and also those in connection with the handling and storing of grain for the Commodity Credit Corporation (here directly involved), were carried on*233 through its Grain Department. Each of said two departments transacted business with nonmembers, as well as with members, of the petitioner cooperative.
During each of the years involved, petitioner purchased grain at its elevator from the producers thereof (including both members and nonmembers of the cooperative). If the seller was a member of the cooperative, he was given credit on petitioner's patronage ledger for the number of bushels which he sold. Title to all grain so purchased, passed to petitioner at the time of its delivery at petitioner's elevator; and such grain was then included by petitioner in its inventory. The seller was paid the current market price for the grain. Thereafter, petitioner sold such grain either on the terminal markets or elsewhere, in such manner as it believed would yield it the greatest profit.
The amounts of grain so purchased by petitioner from producers during the taxable years were as follows:
| Bushels | Bushels | ||
| purchased | purchased | Total | |
| from | from non- | bushels | |
| Year ended | members | members | purchased |
| June 30, 1953 | 552,151 | 117,763 | 669,914 |
| June 30, 1954 | 496,554 | 42,275 | 538,829 |
| June 30, 1955 | 760,219 | 121,350 | 881,569 |
*234 The gross profits realized by petitioner from the sale of grain so purchased were included by petitioner in the so-called "gross savings and income" (representing, in substance, gross profits per books) of its Grain Department, for the purpose of computing patronage dividends.
During each of the taxable years, petitioner also received at its elevator, certain other grain which producers thereof voluntarily surrendered to the Commodity Credit Corporation (a government agency, hereinafter called the "C.C.C."), in satisfaction of government crop loans made to such producers by said agency. Grain so surrendered is hereinafter called "Government grain." The deliveries of such grain at the elevator were made pursuant to written instructions issued to the producers by the county committee which, acting as local representative of the C.C.C., had approved the loans on behalf of said agency. If the delivering producer was a member of the cooperative, he was given credit on petitioner's patronage ledger for the number of bushels delivered. Thereafter, in accordance with written instructions issued by the county committee, petitioner either shipped out the grain at once to a point designated*235 by the committee, or stored it in its elevator, or placed it in government-owned storage bins situated in the locality. If the grain was stored in petitioner's elevator, the handling and storing were done pursuant to a Uniform Grain Storage Agreement between petitioner (as a warehouseman) and the C.C.C., which fixed the amounts of the compensation to be paid to petitioner by the C.C.C. for such services; and a warehouse receipt for the grain was issued by petitioner for the C.C.C. If, on the other hand, the grain was stored by petitioner in government-owned bins, this was done in accordance with a contract between petitioner and the particular county committee, which fixed the amount of the compensation to be paid to petitioner for its services in loading and unloading the grain into and out of such bins.
Title to all Government grain delivered to petitioner by producers in satisfaction of government crop loans, passed to the C.C.C. at the time of its delivery at petitioner's elevator. Petitioner at no time owned any of this Government grain; it at no time included any of the same in its inventory; and it did not market any of such grain on behalf of anyone.
The number of bushels*236 of Government grain delivered to petitioner in each of the taxable years was:
| Bushels | |||
| Bushels | delivered | Total | |
| delivered by | by non- | bushels | |
| Year ended | members | members | delivered |
| June 30, 1953 | 34,476 | 904 | 35,380 |
| June 30, 1954 | 424,991 | 42,614 | 467,605 |
| June 30, 1955 | 519,861 | 195,783 | 715,644 |
The amounts of compensation received by petitioner from the C.C.C. during the taxable years, for handling and storing Government grain were: $8,480.54 for the taxable year 1953; $36,444.82 for the taxable year 1954; and $39,842.58 for the taxable year 1955.
All the above amounts of compensation received for handling and storing Government grain were included by petitioner in the "gross savings and income" of its Grain Department, for the purpose of computing patronage dividends. During the taxable years, petitioner allocated portions of these amounts as patronage dividends, for the benefit of its members only; and it excluded the amounts so allocated from gross income on its Federal income tax returns, by adding the same to its cost of goods purchased.
Neither the C.C.C. nor any county committee acting on behalf of such agency was a member of the*237 petitioner cooperative association.
All patronage dividends for the taxable years involved were allocated to member patrons pursuant to a preexisting obligation imposed on petitioner by the Codes of Iowa.
The respondent, is his notice of deficiency, determined that petitioner was not entitled to exclude from its gross income, as part of its patronage dividends, any of the amounts allocated for the benefit of its members only, out of compensation received from the C.C.C. for handling and storing grain owned by such agency.
Opinion
The issue presented in this case is identical with the first issue presented in the case of Pomeroy Cooperative Grain Co., 31 T.C. - (Dec. 31, 1958). The two cases were tried on the same trial calendar; and the facts of the two cases, relative to the common issue, are substantially the same. At the trial herein, counsel for the petitioner and the respondent agreed that the holding made by this Court in the Pomeroy case, in respect of the first issue therein, should control the decision of the issue in the instant case.
Accordingly we here hold, consistent with the holding heretofore made by us in the Pomeroy case, that amounts allocated by petitioner, *238 as patronage dividends for the benefit of its members only, out of compensation received from the C.C.C. for handling and storing Government grain, do not qualify as true patronage dividends; and that the same are not excludible from petitioner's gross income.
Decision will be entered under Rule 50.