Read the memo 20132701F [PDF 96 KB]
*Pursuant to section 6110(k)(3), written determinations such as field service advice represent the IRS’s analysis of the law as applied to a taxpayer’s specific facts, and they are not intended to be relied upon by third parties and may not be cited as precedent. They do, however, provide an indication of the IRS’s position on the issues addressed.
At issue is whether a large, integrated and diversified agricultural cooperative (operating both as a grain marketing and agricultural supply cooperative) could use the increase in its DPAD under section 199 resulting from the reclassification of certain amounts previously classified as grain purchases as PURPIMs, to reduce its non-patronage income for the year.
The IRS memo concludes that DPAD resulting from the reclassification of the amounts previously classified as grain purchases and classified now as PURPIMs is a deduction incurred in connection with the conduct of patronage business and is inherently patronage-based. Therefore it can only be used to reduce patronage-sourced income, not nonpatronage-sourced income.
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni, in Philadelphia
Or Associate National Director of KPMG’s Cooperative Tax Services
Brett Huston, in Sacramento