PLR: Farmers cooperative’s plan for treatment of loss

PLR: Farmers cooperative’s plan for treatment of loss

The IRS publicly released a private letter ruling* addressing the request of a taxpayer—a farmers cooperative organized as an agricultural marketing association—with respect to its loss in 2013 and the interaction between the tax rules for cooperatives under subchapter T and section 172, and the taxpayer’s plan for treatment of the loss. PLR 201536011 (release date September 4, 2015, and dated May 19, 2015)


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In the letter ruling [PDF 73 KB], the IRS ruled that:

  • After electing to relinquish its entire carryback period with respect to the 2013 loss, the taxpayer may carry its 2013 patronage loss forward in accordance with the provisions of section 172 to be offset against otherwise taxable patronage income earned in 2014 and subsequent years. 
  • For 2014 and subsequent years, after retaining the amounts specified in the taxpayer’s loss recovery plan, any remaining patronage earnings of the general allocation unit will be available for distribution to members as patronage dividends excludable or deductible under section 1382(b). 
  • Any carryover of the 2013 general allocation unit patronage loss will not result in a re-computation of the taxpayer’s patronage dividend exclusion or deduction in carryover years for the purposes of determining the amount of the loss remaining to be carried to subsequent years under section 172(b)(2). 
  • After electing to relinquish its entire carryback period with respect to the 2013 loss, the taxpayer may carry its 2013 nonmember / nonpatronage loss forward in accordance with the provisions of section 172 to be offset against taxable nonmember / nonpatronage income earned in 2014 and subsequent years. 
  • The taxpayer’s loss recovery plan for handling the 2013 net operating loss is consistent with “operating on a cooperative basis” as that term is used in section 1381(a)(2).

*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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