Sale of spectrum as patronage sourced income | KPMG | GLOBAL

Rural telephone cooperative’s sale of spectrum as patronage sourced income

Sale of spectrum as patronage sourced income

The IRS publicly released two private letter rulings* regarding when to treat amounts distributed from the sale of spectrum by rural cooperative telephone companies as patronage sourced income. PLR 201524002 and PLR 201524004 (release date June 12, 2015, and dated February 10, 2015)


Related content

Read text of PLR 201524002 [PDF 64 KB] and of PLR 201524004 [PDF 64 KB]


The three cooperatives—non-exempt rural telephone cooperatives—formed a limited liability company (LLC) and thus treated as a partnership, in order to better provide services to their customers. The LLC purchased spectrum and subsequently sold the spectrum after its price increased. 

The IRS determined that one cooperative’s distributive share of partnership income from the LLC’s spectrum sale constituted patronage sourced income and, if properly allocated to the cooperative’s member-patrons, would be excluded from the cooperative’s gross income in the tax year. This conclusion was based on the determination that the cooperative’s sale of spectrum through the LLC was directly related to its cooperative business purpose to provide telephone service to its patrons.


*Private letter rulings are taxpayer-specific rulings furnished by the IRS National Office in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. It is important to note that, pursuant to section 6110(k)(3), such items cannot be used or cited as precedent. Nonetheless, such rulings can provide useful information about how the IRS may view certain issues.


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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