Income From Cooperatives

If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative.

Form 1099-PATR. The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251 if you’re required to file the form.

Patronage Dividends

You generally report patronage dividends as income on Schedule F for the tax year you receive them. They include the following items.

  • Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative).
  • The stated dollar value of qualified written notices of allocation.
  • The fair market value of other property.

Don’t report as income any patronage dividends you receive from expenditures that weren’t deductible, such as buying personal or family items, capital assets, or depreciable property. You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Personal items include fuel purchased for personal use and basic local telephone service.