SCHERBART V. COMMISSONER: DOES AGENCY SWALLOW COOPERATIVE TAXATION?

摘要

Cooperatives have a long (and complex) history in the United States primarily because of their perceived beneficial use in agriculture by combining many small farmers together to increase market power. Many contentious issues have surrounded cooperatives over the years regarding unlawful combinations, anti-trust, and taxation, to name the most frequently raised issues. However, a long-thought-settled tax issue-agency-has resurfaced. The Internal Revenue Service ("Service") is asserting that the factthat a cooperative is identified, in the marketing agreement or bylaws of a cooperative, as the "sole and exclusive agent" for each member in the marketing of the members' products, results in a true tax agency relationship between the cooperative and each member.The consequence being that the Service has successfully asserted in the case of Scherbarf that when such a cooperative has received payment from a buyer, such amount is deemed to be income received8 by the patrons because of the alleged agency relationship and not under the timing rules for cooperatives in Subchapter T of the Internal Revenue Code. There are two somewhat related issues in these circumstances: (i) the existence of the agency relationship for income tax purposes and (ii) the application of the tax accounting rules under Internal Revenue Code S 451 specifying when income is realized by a taxpayer.