(a) In General. Any corporation allocating to any patron amounts aggregating $100 or more during the calendar year as patronage dividends, rebates, or refunds (whether in cash, merchandise, capital stock, revolving fund certificates, retain certificates, letters of advice, or in some other manner that discloses to each patron the amount of such dividend, rebate, or refund) shall render a return of information with respect to such allocation on Forms 596 and 599. The allocation shall be reported for the calendar year during which the allocation is made. See Reg. 18631-18681(c).

(b) Definitions.

(c) Examples. The application of this regulation may be illustrated by the following examples:

Example 1. Co-operative A, a marketing association operating on a pooling basis, receives the products of Patron W on January 5. On the same day Co-operative A advances to W 45 cents per unit for the products so delivered and allocates to him a “retain certificate” having a face value calculated at the rate of 5 cents per unit. During the operation of the pool, and before substantially all the products in the pool are disposed of, Co-operative A advances to W an additional 40 cents per unit, the amount being determined by reference to the market price of the products sold and the anticipated price of the unsold products. At the close of the pool on November 10, Co-operative A determines the excess of its receipts over the sum of its expenses and its previous advances to patrons, and allocates to W an additional 3 cents per unit and shares of the capital stock of A having an aggregate of face value calculated at the rate of 2 cents per unit.

The amount of patronage dividends, rebates, or refunds allocated to W during 19X1 amount to 5 cents per unit, consisting of the aggregate of the following per-unit allocations: The amount of cash distributions fixed with reference to the earnings of A (3 cents), and the face value of the capital stock of A (2 cents). The amount of the two distributions in cash (85 cents) and the face amount of the “retain certificate” (5 cents), which are fixed without reference to the earnings of A, do not constitute patronage dividends, rebates, or refunds.

Example 2. Co-operative B, a marketing association, operating on a pooling basis, receives the products of Patron X on March 5, 19X1. On the same day Co-operative B pays to X $1 per unit for such products, this amount being determined by reference to the market price of the product when received, and issues to him a “participation certificate” having no face value but which entitles X on the close of the pool to the proceeds derived from the sale of his products less the previous payment of $1 and the expenses and other charges attributable to such products. On March 5, 19X3, Co-operative B, having sold the products in the pool, having deducted the previous payments for such products, and having determined the expenses and other charges of the pool, redeems the participation certificate of X in cash for 10 cents per unit. The allocation made to X during 19X3, amounting to 10 cents per unit, is a patronage dividend, rebate, or refund. Neither the payment to X in 19X1 of $1 nor the issuance to him of the participation certificate in that year constitutes a patronage dividend, rebate, or refund within the meaning of this regulation.

Example 3. Co-operative C, a purchasing association, obtains supplies for Patron Y on May 1, 19X2, and receives in return therefor $100. On February 1, 19X2, Co-operative C, having determined the excess of its receipts over its cost and expenses, allocates to Y a cash distribution of $1 and a revolving fund certificate of a face amount of $1. The amount of patronage dividends, rebates, or refunds allocated to Y for 19X2 are $2, the aggregate of the cash distribution of $1, and the face amount, $1, of the revolving fund certificate.

Example 4. Co-operative D, a service association, sells the products of members on a fee basis. It receives the products of Patron Z under an agreement not to pool his products with those of other members, to sell his products, and to deliver to him the proceeds of the sale. Patron Z makes payments to Co-operative D during 19X1 aggregating $75 for services rendered him by Co-operative D during that year. On May 15, 19X2, Co-operative D, having determined the excess of its receipts over its costs and expenses, allocates to Z a cash distribution of $2. Such amount is a patronage dividend, rebate, or refund allocated by Co-operative D during 19X2.