Chief Counsel memo: QWNAs after cooperative’s conversion to partnership

QWNAs after cooperative’s conversion to partnership

The IRS publicly released a redacted Chief Counsel advice memorandum* stating that a partnership is not entitled to a deduction for its payment with respect to qualified written notices of allocation—QWNAs—issued by a cooperative to its patrons, prior to the cooperative’s conversion into the partnership. CCA 201511020 (release date March 13, 2015, and dated November 13, 2014)

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Read the IRS Chief Counsel memo [PDF 97 KB]

*Chief Counsel advice documents are legal advice, signed by executives in the National Office of the IRS Office of Chief Counsel and issued to IRS personnel who are national program executives and managers. The documents are issued to assist IRS personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues. However, they are not to be used or cited as precedent.


A marketing cooperative was involved in purchasing, processing, and marketing a product from its shareholder patrons. 

The cooperative was subsequently restructured into a limited liability company (partnership). Following this conversion, the partnership continued to process and market the product, but not as a cooperative.

At issue was whether the partnership (a successor in interest to the cooperative) could deduct its payment made to the patrons pursuant to qualified written notices of allocation (QWNAs) that had been issued by the cooperative prior to the conversion.

The IRS Chief Counsel memo concludes that the partnership is not entitled to a deduction because the payment was not made with respect to the QWNAs which had been extinguished as part of the conversion. Rather, the memo states that the payment was made with respect to the preferred partnership interest of the patrons / holders in the partnership.


For more information, contact KPMG’s National Director of Cooperative Tax Services:

David Antoni | +1 (267) 256-1627 |


Or Associate National Director of KPMG’s Cooperative Tax Services

Brett Huston | +1 (916) 554-1654 |

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