2000 Department of the Treasury

Internal Revenue Service

Instructions for Form 990-C

Farmers' Cooperative Association Income Tax Return

Section references are to the Internal Revenue Code unless otherwise noted.

Changes To Note

● The FSC Repeal and Extraterritorial

Income Exclusion Act of 2000 allows

a new extraterritorial income

exclusion for transactions after

September 30, 2000. The exclusion

is based on a cooperative's qualifying

foreign trade income. For more

details and to figure the amount of the

exclusion, see new Form 8873,

Extraterritorial Income Exclusion.

● A cooperative is required to attach

a statement to its income tax return

to disclose participation in certain

transactions that have tax shelter

characteristics or are structured to

avoid tax. See Corporate tax

shelters on page 5.

● Generally, if a cooperative's

average annual gross receipts for the

3 prior tax years are $1 million or

less, it may be eligible to adopt or

change to the cash method of

accounting. If the cooperative makes

this change, it will not be required to

account for inventories. Instead, the

cooperative may treat inventory in the

same manner as costs of materials

and supplies that are not incidental.

For details, see the instructions for

Cost of Goods Sold on page 13.

Photographs of Missing

Children

The Internal Revenue Service is a

proud partner with the National

Center for Missing and Exploited

Children. Photographs of missing

children selected by the Center may

appear in instructions on pages that

would otherwise be blank. You can

help bring these children home by

looking at the photographs and calling

1-800-THE-LOST (1-800-843-5678)

if you recognize a child.

Unresolved Tax Issues

If the cooperative has attempted to

deal with an IRS problem

unsuccessfully, it should contact the

Taxpayer Advocate. The Taxpayer

Advocate independently represents

the cooperative's interests and

concerns within the IRS by protecting

its rights and resolving problems that

have not been fixed through normal

channels.

While Taxpayer Advocates cannot

change the tax law or make a

technical tax decision, they can clear

up problems that resulted from

previous contacts and ensure that the

cooperative's case is given a

complete and impartial review.

The cooperative's assigned

personal advocate will listen to its

point of view and will work with the

cooperative to address its concerns.

The cooperative can expect the

advocate to provide:

● A “fresh look” at a new or on-going

problem.

● Timely acknowledgement.

● The name and phone number of the

individual assigned to its case.

● Updates on progress.

● Timeframes for action.

● Speedy resolution.

● Courteous service.

When contacting the Taxpayer

Advocate, the cooperative should

provide the following information:

● The cooperative's name, address,

and employer identification number.

● The name and telephone number

of an authorized contact person and

the hours he or she can be reached.

● The type of tax return and year(s)

involved.

● A detailed description of the

problem.

● Previous attempts to solve the

problem and the office that had been

contacted.

● A description of the hardship the

cooperative is facing (if applicable).

The cooperative may contact a

Taxpayer Advocate by calling a

toll-free number, 1-877-777-4778.

Persons who have access to

TTY/TDD equipment may call

1-800-829-4059 and ask for Taxpayer

Advocate assistance. If the

cooperative prefers, it may call, write,

or fax the Taxpayer Advocate office

in its area. See Pub. 1546, The

Taxpayer Advocate Service of the

IRS, for a list of addresses and fax

numbers.

How To Get Forms and

Publications

Personal computer. You can

access the IRS Web Site 24 hours a

day, 7 days a week at www.irs.gov

to:

● Download forms, instructions, and

publications.

● See answers to frequently asked

tax questions.

● Search publications on-line by topic

or keyword.

● Send us comments or request help

by e-mail.

● Sign up to receive local and

national tax news by e-mail.

You can also reach us using file

transfer protocol at ftp.irs.gov.

CD-ROM. Order Pub. 1796, Federal

Tax Products on CD-ROM, and get:

● Current year forms, instructions,

and publications.

● Prior year forms, instructions, and

publications.

● Popular tax forms that may be filled

in electronically, printed out for

submission, and saved for

recordkeeping.

● The Internal Revenue Bulletin.

Buy the CD-ROM on the Internet

at www.irs.gov/cdorders from the

National Technical Information

Service (NTIS) for $21 (no handling

fee), or call 1-877-CDFORMS

(1-877-233-6767) toll free to buy the

CD-ROM for $21 (plus a $5 handling

fee).

By phone and in person. You can

order forms and publications 24 hours

a day, 7 days a week, by calling

1-800-TAX-FORM (1-800-829-3676).

You can also get most forms and

publications at your local IRS office.

General Instructions

Purpose of Form

Use Form 990-C, Farmers'

Cooperative Association Income Tax

Return, to report income, gains,

losses, deductions, credits, and to

figure the income tax liability of the

cooperative.

Cat. No. 11288M
Who Must File

Every farmers' cooperative

association must file Form 990-C

whether or not the association has

taxable income (Regulations section

1.6012-2(f)).

Generally, a farmers' cooperative

is a farmers', fruit growers', or like

association organized and operated

on a cooperative basis to:

1. Market the products of

members or other producers and

return to them the proceeds of sales,

less necessary marketing expenses,

on the basis of either the quantity or

value of their products; or 

2. Purchase supplies and

equipment for the use of members or

other persons and turn over the

supplies and equipment to them at

actual cost, plus necessary expenses.

A member is anyone who shares

in the profits of a cooperative

association and is entitled to

participate in the management of the

association.

A producer is a person who, as

owner or tenant, bears the risk of

production and receives income

based on farm production rather than

fixed compensation. For example, if

a cooperative leases its land to a

tenant farmer who agrees to pay a

rental fee based on a percentage of

the farm crops produced, both the

landowner and the tenant farmer

qualify as producers.

When To File

Generally, a cooperative must file its

income tax return by the 15th day of

the 9th month after the end of its tax

year.

If the due date falls on a Saturday,

Sunday, or legal holiday, the

cooperative may file on the next

business day.

Private Delivery Services. You can

use certain private delivery services

designated by the IRS to meet the

“timely mailing as timely filing/paying”

rule for tax returns and payments.

The most recent list of designated

private delivery services was

published by the IRS in August 1999.

The list includes only the following:

● Airborne Express (Airborne):

Overnight Air Express Service, Next

Afternoon Service, Second Day

Service.

● DHL Worldwide Express (DHL):

DHL “Same Day” Service, DHL USA

Overnight.

● Federal Express (FedEx): FedEx

Priority Overnight, FedEx Standard

Overnight, FedEx 2 Day.

● United Parcel Service (UPS): UPS

Next Day Air, UPS Next Day Air

Saver, UPS 2nd Day Air, UPS 2nd

Day Air A.M.

The private delivery service can tell

you how to get written proof of the

mailing date.

Extension. File Form 7004,

Application for Automatic Extension

of Time To File Corporation Income

Tax Return, to request a 6-month

extension of time to file.

Where To File

File Form 990-C with the Internal

Revenue Service, Ogden, UT

84201-0027.

Who Must Sign

The return must be signed and dated

by:

● The president, vice president,

treasurer, assistant treasurer, chief

accounting officer or

● Any other cooperative officer (such

as tax officer) authorized to sign.

 Receivers, trustees, or assignees

also must sign and date any return

filed on behalf of a cooperative.

If a cooperative officer completes

Form 990-C, the Paid Preparer's

space should remain blank. Anyone

who prepares Form 990-C but does

not charge the cooperative should not

sign the return. Generally, anyone

who is paid to prepare the return must

sign it and fill in the other blanks in

the Paid Preparer's Use Only area.

The paid preparer must complete

the required preparer information

and—

● Sign the return, by hand, in the

space provided for the preparer's

signature. (Signature stamps and

labels are not acceptable.)

● Give a copy of the return to the

taxpayer.

Accounting Methods

An accounting method is a set of

rules used to determine when and

how income and expenses are

reported.

Figure taxable income using the

method of accounting regularly used

in keeping the cooperative's books

and records. Generally, permissible

methods include:

● Cash,

● Accrual, or

● Any other method authorized by the

Internal Revenue Code.

 In all cases, the method used must

clearly show taxable income. If

inventories are required, the accrual

method must be used for sales and

purchases of merchandise. See Cost

of Good Sold on page 13.

Generally, a cooperative must use

the accrual method of accounting if its

average annual gross receipts

exceed $5 million. See section

448(c).

Under the accrual method, an

amount is includible in income when:

● All the events have occurred that fix

the right to receive the income, which

is the earliest of the date: (a) the

required performance takes place, (b)

payment is due, or (c) payment is

received, and

● The amount can be determined

with reasonable accuracy.

See Regulations section 1.451-1(a)

for details.

Generally, an accrual basis

taxpayer can deduct accrued

expenses in the tax year when:

● All events that determine the

liability have occurred,

● The amount of the liability can be

figured with reasonable accuracy, and

● Economic performance takes place

with respect to the expense.

 There are exceptions to the

economic performance rule for certain

items, including recurring expenses.

See section 461(h) and the related

regulations for the rules for

determining when economic

performance takes place.

Long-term contracts (except for

certain real property construction

contracts) must generally be

accounted for using the percentage

of completion method described in

section 460. See section 460 for

general rules on long-term contracts.

Change in accounting method.

Generally, the cooperative must get

IRS consent to change the method

of accounting used to report taxable

income (for income as a whole or for

any material item). To do so, it must

file Form 3115, Application for

Change in Accounting Method. For

more information, see Pub. 538,

Accounting Periods and Methods.

Completed crop pool method of

accounting. Cooperatives may use

the completed crop pool method of

accounting for crop pools open before

March 1, 1978. See section 1382(g)

for more information.

Accounting Periods

A cooperative must figure its taxable

income on the basis of a tax year.

The tax year is the annual accounting

period the cooperative uses to keep

its records and report its income and

expenses. Generally, cooperatives

Page 2
can use a calendar year or a fiscal

year.

For more information about

accounting periods, see Temporary

Regulations sections 1.441-1T,

1.441-2T, and Pub. 538.

Calendar year. If the calendar year

is adopted as the annual accounting

period, the cooperative must maintain

its books and records and report its

income and expenses for the period

from January 1 through December 31

of each year.

Fiscal year. A fiscal year is 12

consecutive months ending on the

last day of any month except

December. A 52–53-week year is a

fiscal year that varies from 52 to 53

weeks.

Adoption of tax year. A cooperative

adopts a tax year when it files its first

income tax return. It must adopt a tax

year by the due date (not including

extensions) of its first income tax

return.

Change in tax year. Generally, a

cooperative must get the consent of

the IRS before changing its tax year

by filing Form 1128, Application To

Adopt, Change, or Retain a Tax Year.

However, under certain conditions, a

cooperative may change its tax year

without getting the consent. See

Regulations section 1.442-1 and Pub.

538.

Rounding Off to Whole

Dollars

The cooperative may show amounts

on the return and accompanying

schedules as whole dollars. To do so,

drop any amount less than 50 cents

and increase any amount from 50

cents through 99 cents to the next

higher dollar.

Recordkeeping

Keep the cooperative's records for as

long as they may be needed for the

administration of any provision of the

Internal Revenue Code. Usually,

records that support an item of

income, deduction, or credit on the

return must be kept for 3 years from

the date the return is due or filed,

whichever is later. Keep records that

verify the cooperative's basis in

property for as long as they are

needed to figure the basis of the

original or replacement property.

The cooperative should also keep

copies of any returns it has filed. They

help in preparing future returns and

filing amended returns.

Depository Method of Tax

Payment

The cooperative must pay the tax due

in full no later than the 15th day of the

9th month after the end of the tax

year. The two methods of depositing

cooperative income taxes are

discussed below.

Electronic Deposit Requirement.

The cooperative must make

electronic deposits of all depository

taxes (such as employment tax,

excise tax, and cooperative income

tax) using the Electronic Federal Tax

Payment System (EFTPS) in 2001 if:

● The total deposits of such taxes in

1999 were more than $200,000 or

● The cooperative was required to

use EFTPS in 2000.

If the cooperative is required to use

EFTPS and fails to do so, it may be

subject to a 10% penalty. If the

cooperative is not required to use

EFTPS, it may participate voluntarily.

To enroll in or get more information

about EFTPS, call 1-800-555-4477

or 1-800-945-8400.

Depositing on time. For deposits

made by EFTPS to be on time, the

cooperative must initiate the

transaction at least 1 business day

before the date the deposit is due.

Deposits with Form 8109. If the

cooperative does not use EFTPS,

deposit cooperative income tax

payments (and estimated tax

payments) with Form 8109, Federal

Tax Deposit Coupon. If you do not

have a preprinted Form 8109, use

Form 8109-B to make deposits. You

can get this form only by calling

1-800-829-1040. Be sure to to have

your employer identification number

(EIN) ready when you call.

Do not send deposits directly to an

IRS office; otherwise, the cooperative

may have to pay a penalty. Mail or

deliver the completed Form 8109 with

the payment to an authorized

depositary, i.e., a commercial bank

or other financial institution authorized

to accept Federal tax deposits.

Make checks or money orders

payable to the depositary. To help

ensure proper crediting, write the

cooperative's EIN, the tax period to

which the deposit applies, and “Form

990-C” on the check or money order.

Be sure to darken the “990-C” box on

the coupon. Records of these

deposits will be sent to the IRS.

For more information on deposits,

see the instructions in the coupon

booklet (Form 8109) and Pub. 583,

Starting a Business and Keeping

Records.

CAUTION

! If the cooperative owes tax

when it files Form 990-C, do

not include the payment with

the tax return. Instead, mail or deliver

the payment with Form 8109 to an

authorized depositary or use EFTPS,

if applicable.

Estimated Tax Payments

Generally, the following rules apply to

the cooperative's payments of

estimated tax.

● The cooperative must make

installment payments of estimated tax

if it expects its estimated tax (income

tax minus credits) to be $500 or more.

● The installments are due by the

15th day of the 4th, 6th, 9th, and 12th

months of the tax year. If any date

falls on a Saturday, Sunday, or legal

holiday, the installment is due on the

next regular business day.

● Use Form 1120-W, Estimated Tax

for Corporations, as a worksheet to

compute estimated tax.

● If the cooperative does not use

EFTPS, use the deposit coupons

(Form 8109) to make deposits of

estimated tax.

For more information on estimated

tax payments, including penalties that

apply if the cooperative fails to make

required payments, see the

instructions for line 33 on page 13.

Overpaid estimated tax. If the

cooperative overpaid estimated tax, it

may be able to get a quick refund by

filing Form 4466, Corporation

Application for Quick Refund of

Overpayment of Estimated Tax. The

overpayment must be at least 10%

of expected income tax liability and

be at least $500. File Form 4466

before the 16th day of the 3rd month

after the end of the tax year, but

before the cooperative files its tax

return. Do not file Form 4466 before

the end of the cooperative's tax year.

Interest and Penalties

Interest. Interest is charged on taxes

paid late even if an extension of time

to file is granted. Interest is also

charged on penalties imposed for

failure to file, negligence, fraud, gross

valuation overstatements, and

substantial understatements of tax

from the due date (including

extensions) to the date of payment.

The interest charge is figured at a

rate determined under section 6621.

Penalty for late filing of return. A

cooperative that does not file its tax

return by the due date, including

extensions, may be penalized 5% of

the unpaid tax for each month or part

of a month the return is late, up to a

Page 3
maximum of 25% of the unpaid tax.

The minimum penalty for a return that

is over 60 days late is the smaller of

the tax due or $100. The penalty will

not be imposed if the cooperative can

show that the failure to file on time

was due to reasonable cause.

Cooperatives that file late must attach

a statement explaining the

reasonable cause.

Penalty for late payment of tax. A

cooperative that does not pay the tax

when due generally may be penalized

1

/ 2of 1% of the unpaid tax for each

month or part of a month the tax is

not paid, up to a maximum of 25% of

the unpaid tax. The penalty will not

be imposed if the cooperative can

show that the failure to pay on time

was due to reasonable cause.

Trust fund recovery penalty. This

penalty may apply if certain excise,

income, social security, and Medicare

taxes that must be collected or

withheld are not collected or withheld,

or these taxes are not paid to the IRS.

These taxes are generally reported

on Forms 720, 941, 943, or 945 (see

below Other Forms, Returns,

Schedules, and Statements That

May Be Required). The trust fund

recovery penalty may be imposed on

all persons who are determined by

the IRS to have been responsible for

collecting, accounting for, and paying

over these taxes, and who acted

willfully in not doing so. The penalty

is equal to the unpaid trust fund tax.

See the Instructions for Form 720,

Pub. 15 (Circular E), Employer's Tax

Guide, or Pub. 51 (Circular A),

Agricultural Employer's Tax Guide, for

details, including the definition of

responsible persons.

Other penalties. Other penalties can

be imposed for negligence,

substantial understatement of tax,

and fraud. See sections 6662 and

6663.

Other Forms, Returns,

Schedules and Statements

That May Be Required

The cooperative may have to file

some of the following forms. See the

form for more information.

Form W-2, Wage and Tax Statement,

and Form W-3, Transmittal of Wage

and Tax Statements. Use these forms

to report withheld income, wages,

tips, other compensation, social

security, and Medicare taxes for an

employee.

Form W-2G, Certain Gambling

Winnings. Use this form to report

gambling winnings from horse racing,

dog racing, jai alai, lotteries, keno,

bingo, slot machines, sweepstakes,

wagering pools, etc.

Form 720, Quarterly Federal Excise

Tax Return. Use Form 720 to report

the luxury tax on passenger vehicles

and pay, environmental excise taxes,

communications and air

transportation taxes, fuel taxes,

manufacturers' taxes, ship passenger

taxes, and certain other excise taxes.

Also see Trust fund recovery

penalty above.

Form 926, Return by a U.S.

Transferor of Property to a Foreign

Corporation. Use this form to report

information required under section

6038B.

Form 940 or Form 940-EZ,

Employer's Annual Federal

Unemployment (FUTA) Tax Return.

The cooperative may be liable for

FUTA tax and may have to file Form

940 or 940-EZ if it paid wages of

$1,500 or more in any calendar

quarter in 1999 or 2000 or at least

one employee worked for the

cooperative for some part of a day in

any 20 or more different weeks in

1999 or 20 or more different weeks in

2000.

Form 941, Employer's Quarterly

Federal Tax Return, or, for

agricultural employers, Form 943,

Employer's Annual Tax Return for

Agricultural Employees. Report

income tax withheld and employer

and employee social security and

Medicare taxes (also see Trust fund

recovery penalty above).

Form 945, Annual Return of Withheld

Federal Income Tax. File Form 945

to report income tax withholding from

nonpayroll distributions or payments,

such as pensions, annuities, IRAs,

military retirement, gambling

winnings, Indian gaming profits, and

backup withholding. See Trust fund

recovery penalty above.

Form 966, Corporate Dissolution or

Liquidation. Used to report the

adoption of a resolution or plan to

dissolve the corporation or liquidate

any of its stock.

Form 1042, Annual Withholding Tax

Return for U.S. Source Income of

Foreign Persons, and Form 1042-S,

Foreign Person's U.S. Source Income

Subject to Withholding. Use these

forms to report and send withheld tax

on payments or distributions made to

nonresident alien individuals, foreign

partnerships, or foreign corporations.

Also see Pub. 515, Withholding of

Tax on Nonresident Aliens and

Foreign Corporations, and sections

1441 and 1442.

Form 1096, Annual Summary and

Transmittal of U.S. Information

Returns. Use Form 1096 to transmit

Forms 1099, 1098, 5498, and W-2G

to the Internal Revenue Service.

Form 1098, Mortgage Interest

Statement. Use this form to report the

receipt from any individual of $600 or

more of mortgage interest (including

points) in the course of the

cooperative's trade or business and

reimbursements of overpaid interest.

Forms 1099-A, B, DIV, INT, MISC,

OID, PATR, and R. Use these

information returns to report,

respectively:

● Acquisitions and abandonments of

secured property;

● Proceeds from broker and barter

exchange transactions;

● Certain dividends and distributions;

● Interest income;

● Miscellaneous income (e.g.,

payments to providers of health and

medical services; rent or royalty

payments; nonemployee

compensation, etc.);

● Original issue discount;

● Distributions from cooperatives to

their patrons;

● Distributions from pensions,

annuities, retirement or profit-sharing

plans, individual retirement

arrangements (IRAs)( including

SEPs, SIMPLEs, Roth IRAs and Ed

IRAs, Roth conversions and IRA

recharacterizations) or insurance

contracts.

Note: Every cooperative must file

Form 1099-MISC if, in the course of

its trade or business, it makes

payments of rents, commissions, or

other fixed or determinable income

(see section 6041) totaling $600 or

more to any one person during the

calendar year.

Form 5452, Corporate Report of

Nondividend Distributions. Use this

form to report nondividend

distributions.

Form 5471, Information Return of

U.S. Persons With Respect to Certain

Foreign Corporations. Required if the

cooperative controls a foreign

corporation; acquires, disposes of, or

owns 10% or more in value or vote

of the outstanding stock of a foreign

corporation; or had control of a

foreign corporation for an

uninterrupted period of at least 30

days during the annual accounting

period of the foreign corporation.

Form 5713, International Boycott

Report. Use if the cooperative had

operations in or related to certain

boycotting countries, or with the

Page 4
government, company, or national of

a boycotting country.

Form 8264, Application for

Registration of a Tax Shelter. Tax

shelter organizers use this form to

receive a tax shelter registration

number from the IRS.

Form 8271, Investor Reporting of Tax

Shelter Registration Number.

Taxpayers who have acquired an

interest in a tax shelter, that is

required to be registered, use this

form to report the tax shelter's

registration number. Form 8271 must

be attached to any tax return

(including an application for tentative

refund (Form 1139) and an amended

return) on which a deduction, credit,

loss, or other tax benefit attributable

to a tax shelter is taken or any income

attributable to a tax shelter is

reported.

Form 8275, Disclosure Statement,

and Form 8275-R, Regulation

Disclosure Statement. Use these

forms to disclose items or positions

taken on a tax return that are not

otherwise adequately disclosed on

the return or that are contrary to

Treasury regulations (to avoid parts

of the accuracy-related penalty or

certain preparer penalties).

Form 8300, Report of Cash

Payments Over $10,000 Received in

a Trade or Business. File this form to

report the receipt of more than

$10,000 in cash or foreign currency

in one transaction or in a series of

related transactions.

Form 8594, Asset Acquisition

Statement. Use this form to report the

purchase or sale of a group of assets

that constitute a trade or business if

goodwill or going concern value

attach to the assets.

Form 8810, Corporate Passive

Activity Loss and Credit Limitations.

Closely held cooperatives must use

this form to compute the passive

activity loss and credit allowed under

section 469.

Form 8842, Election To Use Different

Annualization Periods for Corporate

Estimated Tax. Cooperatives use

Form 8842 for each year they want to

elect one of the annualization periods

in section 6655(e)(2)(C) for figuring

estimated tax payments under the

annualized income installment

method.

Form 8849, Claim for Refund of

Excise Taxes. Use this form to claim

a refund of certain excise taxes.

Form 8865, Return of U.S. Person

With Respect To Certain Foreign

Partnerships. A cooperative may

have to file Form 8865 if it:

1. Controlled a foreign partnership

(i.e., owned more than a 50% direct

or indirect interest in the partnership).

2. Owned at least a 10% direct

or indirect interest in a foreign

partnership while U.S. persons

controlled that partnership.

3. Had an acquisition, disposition,

or change in proportional interest in

a foreign partnership that:

● Increased its direct interest to at

least 10% or reduced its direct

interest of at least 10% to less than

10%.

● Changed its direct interest by at

least a 10% interest.

4. Contributed property to a

foreign partnership in exchange for a

partnership interest if:

● Immediately after the contribution,

the cooperative owned, directly or

indirectly, at least a 10% interest in

the foreign partnership; or

● The fair market value (FMV) of the

property the cooperative contributed

to the foreign partnership in exchange

for a partnership interest, when added

to other contributions of property

made to the foreign partnership

during the preceding 12-month

period, exceeds $100,000.

Also, the domestic cooperative may

have to file Form 8865 to report

certain dispositions by a foreign

partnership of property it previously

contributed to that foreign partnership

if it was a partner at the time of the

disposition. For more details,

including penalties for failing to file

Form 8865, see Form 8865 and its

separate instructions.

Consolidated Return

The nonexempt parent of an affiliated

group of cooperatives must attach

Form 851, Affiliations Schedule, to

the consolidated return. For the first

year a consolidated return is filed,

each subsidiary must attach Form

1122, Authorization and Consent of

Subsidiary Corporation To Be

Included in a Consolidated Income

Tax Return.

File supporting statements for each

cooperative included in the

consolidated return. Do not use Form

990-C as a supporting statement. On

the supporting statement use

columns to show the following, both

before and after adjustments:

● Items of gross income and

deductions.

● A computation of taxable income.

● Balance sheets as of the beginning

and end of tax year.

● A reconciliation of income per

books with income per return.

● A reconciliation of retained

earnings.

Enter the totals for the consolidated

group on Form 990-C. Attach

consolidated balance sheets and a

reconciliation of consolidated retained

earnings.

For more information on

consolidated returns, see the

regulations under section 1502.

Statements

Corporate tax shelters. A

cooperative is required to disclose its

participation in certain tax shelters:

● By attaching a disclosure

statement to its income tax return for

a reportable transaction for each tax

year its income tax liability is affected

by its participation in the transaction

and

● For the first tax year a disclosure

statement is attached to its tax return,

by sending a copy of the disclosure

statement to the Internal Revenue

Service, LM:PFTG:OTSA, 1111

Constitution Ave., NW, Washington,

DC 20224.

Disclosure is required for reportable

transactions that are: (a) listed

transactions that the IRS has

identified as a tax avoidance

transaction and (b) other reportable

transactions that have tax shelter

characteristics. A listed transaction

must be reported if it is expected to

reduce the taxpayer's income tax

liability by more than $1 million in a

single tax year or by a total of more

than $2 million for any combination

of years. For other reportable

transactions, the threshold increases

to $5 million for a single tax year or

to $10 million for any combination of

years. Generally, reporting is not

required for customary business

transactions or transactions with tax

benefits that the IRS has no

reasonable basis to challenge.

See Temporary Regulations

section 1.6011-4T for details,

including:

● The definition of a reportable

transaction and a listed transaction,

● The relevant tax shelter

characteristics for other reportable

transactions,

● The form and content of the

disclosure statement, and

● The filing requirements of the

disclosure statement.

 Also, see Notice 2000-15, 2000-12

I.R.B. 826 and Notice 2000-44,

2000-36 I.R.B. 255, for certain listed

transactions determined to have a tax

avoidance purpose and the intended

tax benefits that are subject to

disallowance. The listed transactions

Page 5
in these notices may be updated from

time to time when other tax avoidance

transactions are identified.

Assembling the Return

After page 5, Form 990-C, assemble

any schedules and other forms in the

following order.

1. Form 4136, Form 4626, and

Form 851.

2. Additional schedules in

alphabetical order.

3. Additional forms in numerical

order.

Complete every applicable entry

space on Form 990-C. Do not write

“See attached” instead of completing

the entry spaces. If more space is

needed on the forms or schedules,

attach separate sheets, using the

same size and format as the printed

forms. If there are supporting

statements and attachments, arrange

them in the same order as the

schedules or forms they support and

attach them last. Show the totals on

the printed forms. Also, be sure to

enter the cooperative's name and EIN

on each supporting statement or

attachment.

Specific Instructions

Period covered

File the 2000 return for calendar year

2000 and fiscal years that begin in

2000 and end in 2001. For a fiscal

year, fill in the tax year space at the

top of the form.

Note:The 2000 Form 990-C may also

be used if:

● The cooperative has a tax year of

less than 12 months that begins and

ends in 2001 and

● The 2001 Form 990-C is not

available at the time the cooperative

is required to file its return. The

cooperative must show its 2001 tax

year on the 2000 Form 990-C and

take into account any tax law

changes that are effective for tax

years beginning after December 31,

2000.

Address

Include the suite, room, or other unit

number after the street address. If a

preaddressed label is used, include

this information on the label.

If the Post Office does not deliver

mail to the street address and the

cooperative has a P.O. box, show the

box number instead of the street

address.

Note: If a change in address occurs

after the return is filed, use Form

8822, Change of Address, to notify

the IRS of the new address.

Employer identification

number (EIN).

Show the correct EIN in item B. If the

cooperative does not have an EIN, it

should apply for one on Form SS-4,

Application for Employer Identification

Number. Send Form SS-4 to the

address of the Ogden Internal

Revenue Service Center, as shown in

the instructions for Form SS-4. If the

cooperative has not received its EIN

by the time the return is due, write

“Applied for” in the space for the EIN.

See Pub. 583 for details.

Item A—Business Activity

With the Largest Total

Receipts

Identify the business activity from

which the cooperative receives the

largest total receipts (e.g., wholesale

marketing of meat, drying fruit, grain

storage, wholesale purchasing of

fertilizers, cattle breeding, etc.).

Item C—Consolidated

Return

Do not check this box if the “Section

521” box is checked in Item D.

Item D—Type of

Cooperative

Check the “Tax exempt (Section

521)” box if the cooperative is a

tax-exempt farmers', fruit growers', or

like association, organized and

operated on a cooperative basis and

is described in section 521.

If the cooperative has submitted

Form 1028, Application for

Recognition of Exemption, but has

not received a determination letter

from the IRS, check the “Tax exempt

(Section 521)” box, and write

“Application Pending” at the top of

page 1 of Form 990-C.

All other farmers', etc.,

cooperatives organized and operated

as described under “Who Must File”

on page 1 of the instructions should

check the “Nonexempt” box.

Cooperatives organized and

operated for purposes other than

those described, such as to purchase

food for members, should not file

Form 990-C. See the instructions for

Form 1120, U.S. Corporation Income

Tax Return, for information about

filing requirements.

Item E—Initial Return,

Final Return, Change of

Address, or Amended

Return

Indicate by checking the applicable

box if the cooperative:

● Is filing its first return,

● Has ceased to exist,

● Had a change of address, or

● Is filing an amended return.

Income

Note: Generally, income from all

sources, whether U.S. or foreign,

must be included.

Line 1. Gross receipts or sales.

Enter gross receipts or sales from all

business operations except those

required to be reported on lines 4a

through 10. In general, advance

payments are reported in the year of

receipt. To report income from

long-term contracts, see section 460.

For special rules for reporting certain

advance payments for goods and

long-term contracts, see Regulations

section 1.451-5. For permissible

methods for reporting certain advance

payments for services by an accrual

method cooperative, see Rev. Proc.

71-21, 1971-2 C.B. 549.

Installment sales. Generally, the

installment method cannot be used

for:

● Sales of property after December

16, 1999, that would otherwise be

reported using the accrual method of

accounting.

● Dealers dispositions of property. A

“dealer disposition” is: (a) any

disposition of personal property by a

person who regularly sells or

otherwise disposes of personal

property of the same type on the

installment plan or (b) any disposition

of real property held for sale to

customers in the ordinary course of

the taxpayer's trade or business.

Exception.These restrictions on

using the installment method do not

apply to dispositions of property used

or produced in a farming business or

sales of timeshares and residential

lots for which the cooperative elects

to pay interest under section

453(l)(3).

Enter on line 1 (and carry to line 3),

the gross profit on collections from

installment sales for any of the

following:

● Dealer dispositions of property

before March 1, 1986.

● Dispositions of property used or

produced in the trade or business of

farming.

Page 6
● Certain dispositions of timeshares

and residential lots reported under the

installment method.

Attach a schedule showing the

following information for the current

and the 3 preceding years: (a) gross

sales, (b) cost of goods sold, (c)

gross profits, (d) percentage of gross

profits to gross sales, (e) amount

collected, and (f) gross profit on the

amount collected.

For sales of timeshares and

residential lots reported under the

installment method, the cooperative's

income tax is increased by the

interest payable under section

453(l)(3). To report this addition to

the tax, see the instructions for the

Schedule J, Form 990-C.

Nonaccrual experience method.

Accrual method taxpayers need not

accrue certain amounts to be

received from the performance of

services that, on the basis of their

experience, will not be collected

(section 448(d)(5)). This provision

does not apply to any amount if

interest is required to be paid on the

amount or if there is any penalty for

failure to timely pay the amount.

Cooperatives that fall under this

provision should attach a schedule

showing total gross receipts, the

amount not accrued as a result of the

application of section 448(d)(5), and

the net amount accrued. Enter the net

amount on line 1a. For more

information and guidelines on this

“nonaccrual experience method,” see

Temporary Regulations section

1.448-2T.

Note: Certain cooperatives that have

gross receipts of $10 million or more

and have patronage and

nonpatronage source income and

deductions, must complete and attach

Form 8817, Allocation of Patronage

and Nonpatronage Income and

Deductions, to their return.

Line 4a. Income from patronage

dividends and per-unit retain

allocations. Attach a schedule listing

the name of each declaring

association from which the

cooperative received income from

patronage dividends and per-unit

retain allocations , and the total

amount received from each

association.

Include on the schedule the items

listed in 1 through 6 below:

1. Patronage dividends received

in:

● Money,

● Qualified written notices of

allocation, or

● Other property (except nonqualified

written notices of allocation).

2. Nonpatronage distributions

received on a patronage basis from

tax-exempt farmers' cooperatives in:

● Money,

● Qualified written notices of

allocation, or

● Other property (except nonqualified

written notices of allocation), based

on earnings of that cooperative either

from business done with or for the

United States or any of its agencies

(or from sources other than

patronage, such as investment

income).

3. Qualified written notices of

allocation at their stated dollar

amounts and property at its fair

market value (FMV).

4. Amounts received on the

redemption, sale, or other

disposition of nonqualified written

notices of allocation.

Generally, patronage dividends

from purchases of capital assets or

depreciable property are not

includible in income but must be used

to reduce the basis of the assets. See

section 1385(b) and the related

regulations.

5. Amounts received (or the

stated dollar value of qualified

per-unit retain certificates received)

from the sale or redemption of

nonqualified per-unit retain

certificates.

6. Per-unit retain allocations

received (except nonqualified per-unit

retain certificates). See section 1385.

Note: Payments from the Commodity

Credit Corporation to a farmers'

cooperative for certain expenses of

the co-op's farmers-producers under

a “reseal” program of the U.S.

Department of Agriculture are

patronage-source income that may

give rise to patronage dividends

under section 1382(b)(1). See Rev.

Rul. 89-97, 1989-2 C.B. 217, for more

information.

Line 5. Interest. Enter taxable

interest on U.S. obligations and on

loans, notes, mortgages, bonds, bank

deposits, corporate bonds, tax

refunds, etc.

Do not offset interest expense

against interest income.

Special rules apply to interest

income from certain below-market

rate loans. See section 7872 for more

information.

Note: Interest income is generally

nonpatronage income to nonexempt

cooperatives (Regulations section

1.1382-3(c)(2)). As such, a patronage

dividend deduction may not be

deductible from interest expense.

Line 6. Gross rents. Enter the gross

amount received from the rental of

property. Deduct expenses such as

repairs, interest, taxes, and

depreciation on the proper lines for

deductions.

Generally, gross rents are

considered nonpatronage income to

nonexempt cooperatives (Regulations

section 1.1382-3(c)(2)). As such, a

patronage dividend deduction may

not be deductible from rental

expense.

Line 8. Capital gain net income.

Every sale or exchange of a capital

asset must be reported in detail on

Schedule D (Form 1120), Capital

Gains and Losses, even though no

gain or loss is indicated. Generally,

capital gains and losses are

considered nonpatronage source.

Line 10. Other income. Enter any

other taxable income not reported on

lines 1 through 9. List the type and

amount of income on an attached

schedule. If the cooperative has only

one item of other income, describe it

in parentheses on line 10. Examples

of other income to report on line 10

are:

● Any adjustment under section

481(a) required to be included in

income during the current tax year

due to a change in a method of

accounting.

● Recoveries of bad debts deducted

in prior years under the specific

charge-off method.

● The amount of credit for alcohol

used as fuel (determined without

regard to the limitation based on tax)

that was entered on Form 6478,

Credit for Alcohol Used as Fuel.

● Refunds of taxes deducted in prior

years to the extent they reduced

income subject to tax in the year

deducted (see section 111). Do not

offset current year taxes against tax

refunds.

● The amount of any deduction

previously taken under section 179A

that is subject to recapture. The

cooperative must recapture the

benefit of any allowable deduction for

clean-fuel vehicle property (or

clean-fuel vehicle refueling property),

if, within 3 years of the date the

property was placed in service, it

ceases to qualify. See Regulations

section 1.179A-1 for details.

● For cooperatives described in

section 1381 that are shareholders in

an FSC, include the nonexempt

portion of foreign trade income from

the sale or other disposition of

agricultural or horticultural products

by the FSC for the tax year that

includes the last day of the FSC's tax

Page 7
year, even though the FSC is not

required to distribute such income

until the due date of its income tax

return.

● Ordinary income from trade or

business activities of a partnership

(from Schedule K-1 (Form 1065 or

1065-B)).Do not offset ordinary losses

against ordinary income. Instead,

include the losses on line 26, Form

990-C. Show the partnership's name,

address and EIN on a seperate

statement attached to this return. If

the amount entered is from more than

one partnership, identify the amount

from each partnership.

Deductions

Limitations on deductions

Section 263A uniform

capitalization rules. The uniform

capitalization rules of section 263A

require cooperatives to capitalize or

include in inventory costs, certain

costs incurred in connection with:

● The production of real property and

tangible personal property held in

inventory or held for sale in the

ordinary course of business.

● Real property or personal property

(tangible and intangible) acquired for

resale.

● The production of real property and

tangible personal property by a

cooperative for use in its trade or

business or in activity engaged in for

profit.

Tangible personal property

produced by a cooperative includes

a film, sound recording, videotape,

book, or similar property.

Cooperatives subject to the rules

are required to capitalize not only

direct costs but an allocable part of

most indirect costs (including taxes)

that (a) benefit the assets produced

or acquired for resale or (b) are

incurred by reason of the

performance of production or resale

activities.

For inventory, some of the indirect

expenses that must be capitalized

are:

● Administration expenses.

● Taxes.

● Depreciation.

● Insurance.

● Compensation paid to officers

attributable to services.

● Reworked labor.

● Contributions to pension, stock

bonus, and certain profit-sharing,

annuity, or deferred compensation

plans.

Regulations section 1.263A-1(e)(3)

specifies other indirect costs that

relate to production or resale activities

that must be capitalized and those

that may be currently deductible.

Interest expense paid or incurred

during the production period of

designated property must be

capitalized and is governed by special

rules. For more details, see

Regulations sections 1.263A-8

through 1.263A-15.

The costs required to be capitalized

under section 263A are not deductible

until the property (to which the costs

relate) is sold, used, or otherwise

disposed of by the cooperative.

Exceptions.

Section 263A does not apply to:

● Personal property acquired for

resale if the cooperative's average

annual gross receipts for the 3 prior

tax years were $10 million or less.

● Timber.

● Most property produced under a

long-term contract.

● Certain property produced in a

farming business.

● Research and experimental costs

under section 174.

● Intangible drilling costs for oil, gas,

and geothermal property.

● Mining exploration and

development costs.

● Inventory of a cash method

cooperative that does not account for

inventories. See Pub 553,Highlights

of 2000 Tax Changes for details.

For more details on the uniform

capitalization rules, see Regulations

sections 1.263A-1 through 1.263A-3

and section 1.263A-4 for rules for

property produced in a farming

business.

Transactions between related

taxpayers. Generally, an accrual

basis taxpayer may only deduct

business expenses and interest owed

to a related party in the year payment

is included in income of the related

party. See sections 163(e)(3), 163(j),

and 267 for the limitations on

deductions for unpaid interest and

expenses.

Section 291 limitations.

Cooperatives may be required to

adjust deductions for depletion of iron

ore and coal, intangible drilling,

exploration and development costs,

and the amortizable basis of pollution

control facilities. See section 291 to

determine the amount of the

adjustment. Also see section 43.

Golden parachute payments. A

portion of the payments made by a

cooperative to key personnel that

exceeds their usual compensation

may not be deductible. This occurs

when the cooperative has an

agreement (golden parachute) with

these key employees to pay them

these excessive amounts if control of

the cooperative changes. See section

280G.

Business start-up expenses.

Business start-up expenses must be

capitalized unless an election is made

to amortize them over a period of 60

months. See section 195 and

Regulations section 1.195-1.

Passive activity limitations.

Limitations on passive activity losses

and credits under section 469 apply

to closely held cooperatives.

For this purpose, a cooperative is

a closely held cooperative if at any

time during the last half of the tax

year more than 50% in value of its

outstanding stock is owned, directly

or indirectly, by or for not more than

5 individuals. Certain organizations

are treated as individuals for

purposes of this test. See section

542(a)(2). For rules of determining

stock ownership, see section 544 (as

modified by section 465(a)(3)).

Generally, the two kinds of passive

activities are:

● Trade or business activities in

which the cooperative did not

materially participate (see Temporary

Regulations section 1.469-1T(g)(3))

for the tax year, and

● Rental activities regardless of its

participation.

For exceptions, see Form 8810.

 An activity is a trade or business

activity if it is not a rental activity, and:

● The activity involves the conduct of

a trade or business (i.e., deductions

from the activity would be allowable

under section 162 if other limitations,

such as the passive loss rules, did not

apply) or

● The activity involves research and

experimental costs that are deductible

under section 174 (or would be

deductible if the cooperative chose to

deduct rather than capitalize them).

Cooperatives subject to the passive

activity limitations must complete

Form 8810 to compute their allowable

passive activity loss and credit.

Before completing Form 8810, see

Temporary Regulations section

1.163-8T, which provides rules for

allocating interest expense among

activities. If a passive activity is also

subject to the earnings stripping rules

of section 163(j) or the at-risk rules

of section 465, those rules apply

before the passive loss rules. For

more information, see section 469,

the related regulations, and Pub. 925,

Passive Activity and At-Risk Rules.

Page 8
Reducing certain expenses for

which credits are allowable. For

each credit listed below, the

cooperative must reduce the

otherwise allowable deductions for

expenses used to figure the credit by

the amount of the current year credit:

1. Work opportunity credit.

2. Research credit.

3. Enhanced oil recovery credit.

4. Disabled access credit.

5. Empowerment zone

employment credit.

6. Indian employment credit.

7. The employer credit for social

security and Medicare taxes paid on

tips.

8. Orphan drug credit.

9. Welfare-to-work credit.

If the cooperative has any of these

credits, figure each current year credit

before figuring the deduction for

expenses on which the credit is

based.

Line 12. Compensation of officers.

Enter deductible officers'

compensation on line 12. Before

entering an amount on line 12,

complete Schedule E if the

cooperative's total receipts (line 1a

plus lines 4 through 10, page 1) are

$500,000 or more. Do not include

compensation deductible elsewhere

on the return, such as amounts

included in cost of goods sold,

elective contributions to a section

401(k) cash or deferred arrangement,

or amounts contributed under a salary

reduction SEP agreement or a

SIMPLE IRA plan.

Include only the deductible part of

officers' compensation on Schedule

E. (See Disallowance of deduction

for employee compensation in

excess of $1 million below).

Complete Schedule E, line 1,

columns (a) through (f), for all

officers. The cooperative determines

who is an officer under the laws of the

state where it is organized.

If a consolidated return is filed,

each member of an affiliated group

must furnish this information.

Disallowance of deduction for

employee compensation in excess

of $1 million. Publicly held

corporations may not deduct

compensation to a “covered

employee” to the extent that the

compensation exceeds $1 million.

For details, see section 162(m) and

Regulations section 1.162-27.

Line 13. Salaries and wages. Enter

the amount of salaries and wages

paid for the tax year, reduced by:

● Any work opportunity credit from

Form 5884,

● Any empowerment zone

employment credit from Form 8844,

● Any Indian employment credit from

Form 8845, and

● Any welfare-to-work credit from

Form 8861.

 See the instructions for these forms

for more information. Do not include

salaries and wages deductible

elsewhere on the return, such as

amounts included in cost of goods

sold, elective contributions to a

section 401(k) cash or deferred

arrangement, or amounts contributed

under a salary reduction SEP

agreement or a SIMPLE IRA plan.

CAUTION

! If the cooperative provided

taxable fringe benefits to its

employees, such as personal

use of a car, do not deduct as wages

the amount allocated for depreciation

and other expenses claimed on lines

20 and 26.

Line 14. Repairs and maintenance.

Enter the cost of incidental repairs,

such as labor and supplies, that do

not add to the value of the property

or appreciably prolong its life. New

buildings, machinery, or permanent

improvements that increase the value

of the property are not deductible.

They must be depreciated or

amortized.

Line 15. Bad debts. Enter the total

debts that became worthless in whole

or in part during the tax year.

CAUTION

! A cash method taxpayer may

not claim a bad debt deduction

unless the amount was

previously included in income.

Line 17. Taxes and licenses. Enter

taxes paid or accrued during the tax

year, but do not include the

following:

● Federal income taxes.

● Foreign or U.S. possession income

taxes if a tax credit is claimed

(however, see the instructions for

Form 5735 for special rules for

possession income taxes).

● Taxes not imposed on the

cooperative.

● Taxes, including state or local sales

taxes, that are paid or incurred in

connection with an acquisition or

disposition of property (these taxes

must be treated as part of the cost of

the acquired property, or in the case

of a disposition, as a reduction in the

amount realized on the disposition).

● Taxes assessed against local

benefits that increase the value of the

property assessed (such as for

paving, etc.).

● Taxes deducted elsewhere on the

return, such as those reflected in cost

of goods sold.

See section 164(d) for

apportionment of taxes on real

property between the seller and

purchaser.

Line 18. Interest.

Note: The deduction for interest is

limited when the cooperative is a

policyholder or beneficiary with

respect to a life insurance,

endowment, or annuity contract

issued after June 8, 1997. For details,

see section 264(f). Attach a statement

showing the computation of the

deduction.

Do not deduct the following

interest:

● Interest on indebtedness incurred

or continued to purchase or carry

obligations the interest on which is

wholly exempt from income tax.

● For cash basis taxpayers, prepaid

interest allocable to years following

the current tax year (e.g., a cash

basis calendar year taxpayer who in

2000 prepaid interest allocable to any

period after 2000 can deduct only the

amount allocable to 2000).

● Interest and carrying charges on

straddles. Generally, these amounts

must be capitalized. See section

263(g).

● Interest on debt allocable to the

production of designated property by

a cooperative for its own use or for

sale. This interest must be

capitalized. A cooperative must also

capitalize any interest on debt

allocable to an asset used to produce

the above property. See section

263A(f) and Regulations sections

1.263A-8 through 1.263A-15 for

definitions and more information.

Special rules apply to:

● Interest on which no tax is imposed

(see section 163(j)).

● Forgone interest on certain

below-market-rate loans (see section

7872).

● Original issue discount on certain

high yield discount obligations (see

section 163(e) to figure the

disqualified portion).

Line 19. Charitable contributions.

Enter contributions or gifts actually

paid in the tax year to or for the use

of charitable and governmental

organizations described in section

170(c) and any unused contributions

carried over from prior years.

Cooperatives reporting taxable

income on the accrual method may

elect to treat as paid during the tax

year any contributions paid by the

15th day of the 3rd month after the

end of the tax year if the contributions

were authorized by the board of

directors during the current tax year.

Attach a declaration to the return,

Page 9
signed by an officer, stating that the

resolution authorizing the

contributions was adopted by the

board of directors during the current

tax year. Also, attach a copy of the

resolution.

Limitation on deduction. The

total amount claimed may not be

more than 10% of taxable income

(line 30) computed without regard to

the following:

● Any deduction for contributions;

● The special deductions on line 29b,

Form 990-C;

● Any net operating loss (NOL)

carryback to the tax year under

section 172;

● Any capital loss carryback to the tax

year under section 1212(a)(1); and

● The deduction allowed under

section 249.

Carryover. Charitable

contributions over the 10% limitation

may not be deducted for the tax year

but may be carried over to the next 5

tax years.

Special rules apply if the

cooperative has an NOL carryover to

the tax year. In figuring the charitable

contributions deduction for the tax

year, the 10% limit is applied using

the taxable income after taking into

account any deduction for the NOL.

To figure the amount of any

remaining NOL carryover to later

years, taxable income must be

modified (see section 172(b)). To the

extent that contributions are used to

reduce taxable income for this

purpose and increase an NOL

carryover, a contributions carryover is

not allowed. See section 170(d)(2)(B).

Substantiation requirements.

Generally, no deduction is allowed for

any contribution of $250 or more

unless the cooperative gets a written

acknowledgment from the donee

organization that shows the amount

of cash contributed, describes any

property contributed, and gives an

estimate of the value of any goods or

services provided in return for the

contribution. The acknowledgment

must be obtained by the due date

(including extensions) of the

cooperative's return, or, if earlier, the

date the return is filed. Do not attach

the acknowledgment to the tax return,

but keep it with the cooperative's

records. These rules apply in addition

to the filing requirements for Form

8283 described below.

For more information on

substantiation and recordkeeping

requirements, see the regulations

under section 170 and Pub. 526,

Charitable Contributions.

Contributions to organizations

conducting lobbying activities.

Contributions made to an

organization that conducts lobbying

activities are not deductible if:

● The lobbying activities relate to

matters of direct financial interest to

the donor's trade or business and

● The principal purpose of the

contribution was to avoid Federal

income tax by obtaining a deduction

for activities that would have been

nondeductible under the lobbying

expense rules if conducted directly by

the donor.

Contributions of property other

than cash. If a cooperative

contributes property other than cash

and claims over a $500 deduction for

the property, it must attach a

schedule to the return describing the

kind of property contributed and the

method used to determine its fair

market value (FMV). Generally,

cooperatives must complete and

attach Form 8283, Noncash

Charitable Contributions, to their

returns for all contributions of property

(other than money) if the total claimed

deduction for all property contributed

was more than $5,000.

If the cooperative made a “qualified

conservation contribution” under

section 170(h), also include the FMV

of the underlying property before and

after the donation, as well as the type

of legal interest contributed, and

describe the conservation purpose

benefited by the donation.

If a contribution carryover was

included, show the amount and how

it was determined.

Reduced deduction for

contributions of certain property.

For a charitable contribution of

property, the cooperative must reduce

the contribution by the sum of:

1. The ordinary income and

short-term capital gain that would

have resulted if the property were

sold at its FMV and

2. For certain contributions, the

long-term capital gain that would have

resulted if the property were sold at

its FMV.

The reduction for the long-term

capital gain applies to:

● Contributions of tangible personal

property for use by an exempt

organization for a purpose or function

unrelated to the basis for its

exemption, and

● Contributions of any property to or

for the use of certain private

foundations, except for stock, for

which market quotations are readily

available (section 170(e)(5)).

Larger deduction. A larger

deduction is allowed for certain

contributions of:

● Inventory and other property to

certain organizations for use in the

care of the ill, needy, or infants (see

section 170(e)(3) and Regulations

section 1.170A-4A);

● Scientific equipment used for

research to institutions of higher

learning or to certain scientific

research organizations (other than by

personal holding companies and

service organizations) (see section

170(e)(4));

● Computer technology and

equipment to schools.

Contributions of computer

technology and equipment to

schools. A cooperative may take an

increased deduction under section

170(e)(6) for qualified contributions

of computer technology or equipment

for elementary or secondary school

purposes. A contribution is a

qualified contribution if:

● It is made to an eligible donee (see

below);

● Substantially all of the donee

property's use is:

1. Related to the purpose or

function of the donee,

2. For use within the United

States, and

3. For educational purposes in

any grade K–12.

● The contribution is made not later

than 2 years after the date the

taxpayer acquired or substantially

completed the construction of the

property;

● The original use of the property is

by the donor or the donee;

● The property is not transferred by

the donee for money, services, or

other property, except for shipping,

transfer, and installation costs; and

● The property fits productively into

the donee's education plan.

Eligible donee. The term eligble

donee means:

● An educational organization that

normally maintains a regular faculty

and curriculum and has a regularly

enrolled body of pupils in attendance

at the place where its educational

activities are regularly conducted or

● A section 501(c)(3) entity organized

primarily for purposes of supporting

elementary and secondary education.

Note: Contributions of computer

technology or equipment to private

foundations may be treated as

qualified elementary or secondary

educational contributions if certain

requirements are met. See section

170(e)(6)(C).

Page 10
Line 20. Depreciation. Besides

depreciation, include on line 20 the

part of the cost that the cooperative

elected to expense under section 179

for certain tangible property placed in

service during tax year 2000 or

carried over from 1999. See Form

4562, Depreciation and Amortization,

and its instructions.

Line 22. Depletion. See sections

613 and 613A for percentage

depletion rates applicable to natural

deposits. Also, see section 291 for

the limitation on the depletion

deduction for iron ore and coal

(including lignite).

Attach Form T (Timber), Forest

Activities Schedules, if a deduction for

depletion of timber is taken.

Foreign intangible drilling costs and

foreign exploration and development

costs must either be added to the

cooperative's basis for cost depletion

purposes or be deducted ratably over

a 10-year period. See sections 263(i),

616, and 617 for details.

Line 24. Pension, profit-sharing,

etc., plans. Enter the deduction for

contributions to qualified pension,

profit-sharing, or other funded

deferred compensation plans.

Employers who maintain such a plan

generally must file one of the forms

listed below, even if the plan is not a

qualified plan under the Internal

Revenue Code. The filing

requirement applies even if the

cooperative does not claim a

deduction for the current tax year.

There are penalties for failure to file

these forms on time and for

overstating the pension plan

deduction. See sections 6652(e) and

6662(f).

Form 5500, Annual Return/Report of

Employee Benefit Plan. File this form

for a plan that is not a one-participant

plan (see below).

Form 5500-EZ, Annual Return of

One-Participant (Owners and Their

Spouses) Retirement Plan. File this

form for a plan that only covers the

owner (or the owner and his or her

spouse) but only if the owner (or the

own and his or her spouse) owns the

entire business.

Line 25. Employee benefit

programs. Enter the contributions to

employee benefit programs not

claimed elsewhere on the return (e.g.,

insurance, health and welfare

programs, etc.) that are not an

incidental part of a pension,

profit-sharing, etc., plan included on

line 24.

Line 26. Other deductions.

Attach a schedule, listing by type

and amount, all allowable deductions

that are not deductible elsewhere on

Form 990-C.

Examples of amounts to include:

● Amortization of pollution control

facilities, organization expenses, etc.

See Form 4562.

● Insurance premiums.

● Legal and professional fees.

● Supplies used and consumed in the

business.

● Utilities.

● Ordinary losses from trade or

business activities of a partnership

(from Schedule K-1 (Form 1065 or

1065-B). Do not offset ordinary losses

against ordinary income. Instead,

include the income on line 10. If the

amount entered is from more than

one partnership, identify the amount

from each partnership.

Also see Special rules below for

limits on certain other deductions.

Do not deduct:

● Fines or penalties paid to a

government for violating any law.

● Any amount that is allocable to a

class of exempt income. See section

265(b) for exceptions.

Special rules apply to the following

expenses.

Travel, meals, and entertainment.

Subject to limitations and restrictions

discussed below, a cooperative can

deduct ordinary and necessary travel,

meals, and entertainment expenses

paid or incurred in its trade or

business. Also, special rules apply to

deductions for gifts, skybox rentals,

luxury water travel, convention

expenses, and entertainment tickets.

For details, see section 274 and Pub.

463.

Travel. The cooperative cannot

deduct travel expenses of any

individual accompanying a

cooperative officer or employee,

including a spouse or dependent of

the officer or employee, unless:

● That individual is an employee of

the cooperative and

● His or her travel is for a bona fide

business purpose and would

otherwise be deductible by that

individual.

Meals and entertainment.

Generally, the cooperative can deduct

only 50% of the amount otherwise

allowable for meals and

entertainment expenses paid or

incurred in its trade or business. In

addition (subject to exceptions under

section 274(k)(2)):

● Meals must not be lavish or

extravagant;

● A bona fide business discussion

must occur during, immediately

before, or immediately after the meal;

and

● An employee must be present at

the meal.

See section 274(n)(3) for a special

rule that applies to meal expenses for

individuals subject to the hours of

service limits of the Department of

Transportation.

Membership dues. The

cooperative may deduct amounts

paid or incurred for membership dues

in civic or public service

organizations, professional

organizations, business leagues,

trade associations, chambers of

commerce, boards of trade, and real

estate boards, unless a principal

purpose of the organization is to

entertain or provide entertainment

facilities for members or their guest.

In addition, cooperatives may not

deduct membership dues in any club

organized for business, pleasure,

recreation, or other social purpose.

This includes country clubs, golf and

athletic clubs, airline and hotel clubs,

and clubs operated to provide meals

under conditions favorable to

business discussion.

Entertainment facilities. The

cooperative cannot deduct an

expense paid or incurred for a facility

(such as a yacht or hunting lodge)

used for an activity that is usually

considered entertainment,

amusement, or recreation.

Note: The cooperative may be able

to deduct the otherwise nondeductible

expense if the amount is treated as

compensation and reported on Form

W-2 for an employee or on Form

1099-MISC for an independent

contractor.

Lobbying expenses. Generally,

lobbying expenses are not deductible.

These expenses include:

● Amounts paid or incurred in

connection with influencing Federal

or state legislation (but not local

legislation) or

● Amounts paid or incurred in

connection with any communication

with certain Federal executive branch

officials in an attempt to influence the

official actions or positions of the

officials. See Regulations section

1.162-29 for the definition of

“influencing legislation.”

Dues and other similar amounts

paid to certain tax-exempt

organizations may not be deductible.

See section 162(e)(3). If certain

in-house expenditures do not exceed

$2,000, they are deductible. For

information on contributions to

Page 11
charitable organizations that conduct

lobbying activities, see the

instructions for line 19. For more

information on lobbying expenses,

see section 162(e).

Line 28

Taxable income before NOL

deduction and special deductions

At-risk rules. Special at-risk rules

under section 465 generally apply to

closely held cooperatives (see

Passive activity limitations on page

8) engaged in any activity as a trade

or business or for the production of

income. These cooperatives may

have to adjust the amount on line 28,

Form 990-C. The at-risk rules do not

apply to the following:

● Holding real property placed in

service by the cooperative before

1987;

● Equipment leasing under sections

465(c)(4), (5), and (6); and

● Any qualifying business of a

qualified cooperative under section

465(c)(7).

However, the at-risk rules do apply

to the holding of mineral property.

If the at-risk rules apply, adjust the

amount on this line for any section

465(d) losses. These losses are

limited to the amount for which the

cooperative is at risk for each

separate activity at the close of the

tax year. If the cooperative is involved

in one or more activities, any of which

incurs a loss for the year, report the

losses for each activity separately.

Attach Form 6198, At-Risk

Limitations, showing the amount at

risk and gross income and deductions

for the activities with the losses.

If the cooperative sells or otherwise

disposes of an asset or its interest

(either total or partial) in an activity to

which the at-risk rules apply,

determine the net profit or loss from

the activity by combining the gain or

loss on the sale or disposition with the

profit or loss from the activity. If the

cooperative has a net loss, it may be

limited because of the at-risk rules.

Treat any loss from an activity not

allowed for the tax year as a

deduction allocable to the activity in

the next tax year.

Line 29a. NOL deduction. A

cooperative may use the net

operating loss (NOL) incurred in 1 tax

year to reduce its taxable income in

another year. Generally, a

cooperative may carry an NOL back

to each of the 2 years, preceding the

year of the loss and then carry any

remaining amount over to each of the

20 years (15 years for NOLs incurred

in tax years beginning before August

6, 1997), following the year of the loss

(see Waiving the carryback period

on page 13). For exceptions to the

general rule, see Special carryback

periods for certain losses on page

13. Enter on line 29a, the total NOL

carryovers from prior tax years, but

do not enter more than the

cooperative's taxable income (after

special deductions). An NOL

deduction cannot be taken in a year

in which the cooperative has negative

taxable income. Attach a schedule

showing the computation of the NOL

deduction. Also complete item 20 on

Schedule N.

For details on the NOL deduction,

see Pub. 536, Net Operating Losses.

Carryback and carryover rules. To

carry back the loss and obtain a quick

refund of taxes, use Form 1139,

Corporation Application for Tentative

Refund. Form 1139 must be filed

within 12 months after the close of the

tax year of the loss. See section 6411

for details. Do not attach Form 1139

to the cooperative's income tax

return. Mail it in a separate envelope

to the service center where the

cooperative files its income tax return.

For carryback claims filed later than

12 months after the close of the tax

year of the loss, file an amended

Form 990-C, instead of Form 1139.

After the cooperative has applied

the NOL to the first tax year to which

it may be carried, the taxable income

of that year is modified (as described

in section 172(b)) to determine how

much of the remaining loss may be

carried to other years. See section

172(b) and the related regulations for

details.

Special NOL rules apply when:

● An ownership change occurs (i.e.,

the amount of the taxable income of

a loss cooperative that can be offset

by pre-change NOL carryovers is

limited). See section 382 and the

related regulations. Also see

Temporary Regulations section

1.382-2T(a)(2)(ii), which requires that

a loss cooperative file an information

statement with its income tax return

for each tax year that it is a loss

cooperative and certain shifts in

ownership occurred. Also see

Regulations section 1.382-6(b) for

details on how to make the

closing-of-the-books election.

● A cooperative acquires control of

another cooperative (or acquires its

assets in a reorganization) and the

amount of pre-acquisition losses that

may offset recognized built-in gains is

limited. See section 384.

Waiving the carryback period. A

cooperative may make an irrevocable

election to forego the carryback

period and instead carry the NOL

forward to years following the year of

the loss. To make this election, check

the box in item 19 on Schedule N.

The return must be timely filed

(including extensions).

Special carryback periods for

certain losses. The regular 2 or

3-year carryback period generally

does not apply to the following losses.

● Specified liability losses,

including a product liability loss. The

part of an NOL that is attributable to

a specified liability loss may be

carried back 10 years. The

cooperative may, however, elect to

treat such a loss as if it were not a

specified liability loss. If the

corporation makes this election, the

loss carryback period will be 2, 3, or

5 years, whichever applies. Make the

election by attaching a statement to

a timely filed return including

extensions. However, see Exception

below. Also see section 172(b)(1)(C).

● Farming losses. An NOL

attributable to any farming business

may be carried back 5 years.

However, the cooperative may elect

to treat the loss as if it were not a

farming loss. If the cooperative makes

this election, the loss carryback

period will be 2 or 3 years, whichever

applies. Make the election by

attaching a statement to a timely filed

return (including extensions,

however, see Exception ). Also see

section 172(b)(1)(G) and 172(i)

Exception. If the cooperative timely

filed its return for the loss year without

making the election (see Specified

liability losses or Farming losses

above), the cooperative may still

make the election by filing an

amended return within 6 months of

the due date of the loss year return

(excluding extensions). Attach the

election to the amended return and

write “Filed pursuant to section

301.9100-2” on the election

statement. File the amended return

at the same address the original

return was filed. Once made, the

election is irrevocable.

● Eligible losses.The part of an NOL

that is attributable to an eligible loss

may be carried back 3 years. An

“eligible loss” is an NOL attributable

to a Presidentially declared disaster

if, for the tax year in which the NOL

arose, the cooperative was (a)

engaged in a farming business or (b)

a small business that met the gross

receipts test of section 448(c). An

eligible loss does not include any

farming loss or specified liability loss

described above.

●

Page 12
Line 30. Taxable income. For

cooperatives required to file Form

8817, taxable income reported on line

30 may not exceed the combined

taxable income shown on line 30,

Form 8817. Attach Form 8817 to the

cooperative's tax return. See Form

8817 for more details.

CAUTION

! Patronage source losses

cannot be used to offset

nonpatronage income. See

section 1388(j) for more information .

Line 32b. Estimated tax payments.

Enter any estimated tax payments the

cooperative made for the tax year.

Beneficiaries of trusts. If the

cooperative is the beneficiary of a

trust, and the trust makes a section

643(g) election to credit its estimated

tax payments to its beneficiaries,

include the cooperative's share of the

estimated tax payment in the total

amount entered on line 32b. Write

“T” and the amount of the payment in

the blank space to the right of the

entry space.

Line 32f. Credit from refiguring tax

for years in which nonqualified

per-unit retain certificates or

nonqualified written notices of

allocation (redeemed this year)

were issued. If the cooperative paid

less total tax by not claiming the

deduction for the redemption of

nonqualified written notices of

allocation or nonqualified per-unit

retain certificates in the current tax

year, and instead the cooperative

refigured the tax for the years the

nonqualified written notices or

certificates were originally issued,

enter the amount of the reduction in

the issue years' taxes on this line.

Attach a schedule showing how the

credit was figured. This credit is

treated as a payment, and any

amount that is more than the tax on

line 31 will be refunded.

Line 32g. Credit for federal tax on

fuels. Complete Form 4136, Credit

for Federal Tax Paid on Fuels, if the

cooperative qualifies to take this

credit. See Assembling the Return

on page 6.

Line 32h. Total payments. Add the

amounts on lines 32d through 32g

and enter the total on line 32h.

Backup withholding. If the

cooperative had income tax withheld

from any payments it received,

because, for example, it failed to give

the payer its correct EIN, include the

amount withheld in the total for line

32h. This type of withholding is called

backup withholding. Show the amount

withheld in the blank space in the

right-hand column between lines 31

and 32h, and write “backup

withholding.”

Line 33. Estimated tax penalty. A

cooperative that does not make

estimated tax payments when due

may be subject to an underpayment

penalty for the period of

underpayment. Generally, a

cooperative is subject to the penalty

if its tax liability is $500 or more and

it did not timely pay the smaller of:

● Its tax liability for 2000 or

● Its prior year's tax. See section

6655 for details and exceptions

including special rules for large

cooperatives.

Use Form 2220, Underpayment of

Estimated Tax by Corporations, to

see if the cooperative owes a penalty

and to figure the amount of the

penalty. Generally, the cooperative

does not have to file this form

because the IRS can figure the

amount of any penalty and bill the

cooperative for it. However, even if

the cooperative does not owe the

penalty you must complete and attach

Form 2220 if:

● The annualized income or adjusted

seasonal installment method is used,

or

● The cooperative is a large

cooperative computing its first

required installment based on the

prior year's tax. (See the Form 2220

instructions for the definition of a

large corporation.)

 If you attach Form 2220, check the

box on line 33, and enter the amount

of any penalty on this line.

Schedule A

Cost of Goods Sold

Generally, inventories are required at

the beginning and end of each tax

year if the production, purchase, or

sale of merchandise is an

income-producing factor. See

Regulations section 1.471-1.

However, if a cooperative's average

annual gross receipts for the 3 prior

tax years are $1 million or less and

the cooperative is an eligible taxpayer

that adopts or changes to the cash

method of accounting, it will not be

required to account for inventories. If

the cooperative is not required to

account for inventories and does not

want to do so, it must treat inventory

in the same manner as costs of

materials and supplies that are not

incidental. Under this rule, inventory

costs for raw materials purchased for

use in producing finish goods and

merchandise purchased for resale are

deductible in the year the finished

goods or merchandise are sold (or, if

later, the year the cooperative paid for

the raw materials or merchandise).

Enter amounts paid for all raw

materials and merchandise during the

tax year on line 2. The amount the

cooperative can deduct for the tax

year is figured on line 9.

If the cooperative wants to change

to the cash method of accounting, it

must file Form 3115. It may also have

to make an adjustment to prevent

amounts of income or expense from

being duplicated or omitted. This is

called a section 481(a) adjustment,

which is taken into account over a

period not to exceed 4 years. For

example, if the cooperative accrued

sales in 1999 for which it received

payment in 2000, it must report those

sales in both years as a result of

changing its accounting method and

will make a section 481(a) adjustment

to prevent duplication of income. See

Rev. Proc. 99-49, 1999-52 I.R.B. 725,

to figure the amount of this

adjustment for the tax year. Include

any positive section 481(a)

adjustment on page 1, line 10. If the

section 481(a) adjustment is negative,

report it on line 26.

For eligibility requirements and

further details on changing to the

cash method of accounting, see Pub.

553.

All filers not using the cash method

of accounting should see Section

263A uniform capitalization rules

on page 8 before completing

Schedule A.

Line 1. Inventory at Beginning of

Year. If the cooperative is changing

its method of accounting from accrual

to cash for the current tax year and it

does not want to account for

inventories, it must refigure last year's

closing inventory using the cash

method and enter the result on line

1. If there is a difference between the

closing inventory and the refigured

amount, attach an explanation and

take it into account when figuring the

cooperative's section 481(a)

adjustment (explained above).

Line 4a. Qualified per-unit retain

certificates are issued to patrons who

have agreed to include the stated

dollar amount in current income.

Line 5. Enter the amount paid in

money or other property (except

per-unit retain certificates) to patrons

to redeem nonqualified per-unit retain

certificates. If a per-unit retain

certificate does not qualify, no

deduction is allowable at the time it is

issued. However, the cooperative

may take a deduction or a refund of

tax when the nonqualified per-unit

retain certificate is finally redeemed,

Page 13
provided that the nonqualified per-unit

retain certificate was paid as a

per-unit retain allocation during the

payment period for the tax year

during which the marketing occurred.

The deduction is allowed only for

amounts paid in money or other

property (other than per-unit retain

certificates) that are not more than

the stated dollar amount of the

nonqualified per-unit retain certificate.

See section 1382(b).

See section 1383 and the

instructions for line 32f for a special

rule for figuring the cooperative's tax

in the year of redemption of a

nonqualified per-unit retain certificate.

Line 6a. An entry is required on this

line only for cooperatives electing a

simplified method of accounting.

For cooperatives that have elected

the simplified production method,

additional section 263A costs are

generally those costs, other than

interest, that were not capitalized

under the cooperative's method of

accounting immediately prior to the

effective date of section 263A that are

now required to be capitalized under

section 263A. For details, see

Regulations section 1.263A-2(b).

For cooperatives that have elected

the simplified resale method,

additional section 263A costs are

generally those costs incurred with

respect to the following categories:

● Off-site storage or warehousing;

● Purchasing;

● Handling, such as processing,

assembly, repackaging, and

transporting;

● General and administrative costs

(mixed service costs).

 For details, see Regulations section

1.263A-3(d).

Enter on line 6a the balance of

section 263A costs paid or incurred

during the tax year not includable on

lines 2, 3, and 6b.

Line 6b. Enter on line 6b any costs

paid or incurred during the tax year

not entered on lines 2 through 6a.

Line 8. See Regulations sections

1.263A-1 through 1.263A-3 for details

on figuring the amount of additional

section 263A costs to be included in

ending inventory. If the cooperative is

using the cash method of accounting

and it does not want to account for

inventories, enter on line 8 the portion

of its raw materials and merchandise

purchased for resale that are included

on line 7 and were not sold during the

year.

Lines 10a through 10f

Inventory valuation methods.

Inventories can be valued at:

● Cost,

● Cost or market value (whichever is

lower), or

● Any other method approved by the

IRS that conforms to the

requirements of the applicable

regulations cited below.

However, the cooperative is

required to use cost if it is using the

cash method of accounting.

Producers whose average annual

gross recipts are $1 million or less

that use the cash method of

accounting and choose not to account

for inventories may currently deduct

expenditures for direct labor and all

indirect costs that would otherwise be

included in inventory costs.

The average cost (rolling average)

method of valuing inventories

generally does not conform to the

requirements of the regulations. See

Rev. Rul. 71-234, 1971-1 C.B. 148.

Cooperatives that use erroneous

valuation methods must change to a

method permitted for Federal income

tax purposes. To make this change,

use Form 3115.

On line 10a, check the method(s)

used for valuing inventories. Under

lower of cost or market, the term

“market” (for normal goods) means

the current bid price prevailing on the

inventory valuation date for the

particular merchandise in the volume

usually purchased by the taxpayer.

For a manufacturer, market applies to

the basic elements of cost—raw

materials, labor, and burden. If

section 263A applies to the taxpayer,

the basic elements of cost must

reflect the current bid price of all

direct costs and all indirect costs

properly allocable to goods on hand

at the inventory date.

Inventory may be valued below cost

when the merchandise is unsalable

at normal prices or unsalable in the

normal way because the goods are

subnormal due to damage,

imperfections, shop wear, etc., within

the meaning of Regulations section

1.471-2(c). The goods may be valued

at a current bona fide selling price,

minus direct cost of disposition (but

not less than scrap value) if such a

price can be established.

If this is the first year the Last-in,

First-out (LIFO) inventory method was

either adopted or extended to

inventory goods not previously valued

under the LIFO method provided for

in section 472, attach Form 970,

Application To Use LIFO Inventory

Method, or a statement with the

information required by Form 970.

Also check the LIFO box on line 10c.

On line 10d, enter the amount or the

percent of total closing inventories

covered under section 472. Estimates

are acceptable.

If the cooperative changed or

extended its inventory to LIFO and

had to write up its opening inventory

to cost in the year of election, report

the effect of this writeup as income

(line 10, page 1) proportionately over

a 3-year period that begins with the

year of the LIFO election (section

472(d)).

For more information on inventory

valuation methods, see Pub. 538,

Accounting Periods and Methods.

Schedule C

Dividends and Special

Deductions

For purposes of the 20% ownership

test on lines 1 through 7, the

percentage of stock owned by the

cooperative is based on voting power

and value of the common stock.

Preferred stock described in section

1504(a)(4) is not taken into account.

Cooperatives filing a consolidated

return should see Regulations

sections 1.1502-13, 1.1502-26, and

1.1502-27 before completing

Schedule C.

Line 1, Column (a). Enter dividends

(except those received on

debt-financed stock acquired after

July 18, 1984—see section 246A)

that:

● Are received from

less-than-20%-owned domestic

corporations subject to income tax

and

● Qualify for the 70% deduction

under section 243(a)(1).

Also include on line 1:

● Taxable distributions from an

IC-DISC or former DISC that are

designated as eligible for the 70%

deduction and certain dividends of

Federal Home Loan Banks. See

section 246(a)(2).

● Dividends (except those received

on debt-financed stock acquired after

July 18, 1984) from a regulated

investment company (RIC). The

amount of dividends eligible for the

dividends-received deduction under

section 243 is limited by section

854(b). The cooperative should

receive a notice from the RIC

specifying the amount of dividends

that qualify for the deduction.

Page 14
Report so-called dividends or

earnings received from mutual

savings banks, etc., as interest. Do

not treat them as dividends.

Line 2, Column (a). Enter on line 2:

● Dividends (except those received

on debt-financed stock acquired after

July 18, 1984) that are received from

20%-or-more-owned domestic

corporations subject to income tax

and that are subject to the 80%

deduction under section 243(c) and

● Taxable distributions from an

IC-DISC or former DISC that are

considered eligible for the 80%

deduction.

Line 3, Column (a). Enter dividends

that are:

● Received on debt-financed stock

acquired after July 18, 1984, that are

received from domestic and foreign

corporations subject to income tax

and that would otherwise be subject

to the dividends-received deduction

under sections 243(a)(1), 243(c), or

245(a). Generally, debt-financed

stock is stock that the cooperative

acquired by incurring a debt (e.g., it

borrowed money to buy the stock).

● Received from a regulated

investment company (RIC) on

debt-financed stock. The amount of

dividends eligible for the

dividends-received deduction is

limited by section 854(b). The

cooperative should receive a notice

from the RIC specifying the amount

of dividends that qualify for the

deduction.

Line 3, Columns (b) and (c).

Dividends received on debt-financed

stock acquired after July 18, 1984,

are not entitled to the full 70% or 80%

dividends-received deduction. The

70% or 80% deduction is reduced by

a percentage that is related to the

amount of debt incurred to acquire

the stock. See section 246A. Also see

section 245(a) before making this

computation for an additional

limitation that applies to dividends

received from foreign corporations.

Attach a schedule to Form 990-C

showing how the amount on line 3,

column (c), was figured.

Line 4, Column (a). Enter dividends

received on the preferred stock of a

less-than-20%-owned public utility

that is subject to income tax and is

allowed the deduction provided in

section 247 for dividends paid.

Line 5, Column (a). Enter dividends

received on preferred stock of a

20%-or-more-owned public utility that

is subject to income tax and is

allowed the deduction provided in

section 247 for dividends paid.

Line 6, Column (a). Enter the

U.S.-source portion of dividends that:

● Are received from

less-than-20%-owned foreign

corporations and

● Qualify for the 70% deduction

under section 245(a).

 To qualify for the 70% deduction, the

cooperative must own at least 10%

of the stock of the foreign corporation

by vote and value.

 Also include dividends received

from a less-than-20%-owned FSC

that:

● Are attributable to income treated

as effectively connected with the

conduct of a trade or business within

the United States (excluding foreign

trade income) and

● Qualify for the 70% deduction

provided in section 245(c)(1)(B).

Line 7, Column (a). Enter the

U.S.-source portion of dividends that

are received from

20%-or-more-owned foreign

corporations and that qualify for the

80% deduction under section 245(a).

Also include dividends received from

a 20%-or-more-owned FSC that:

● Are attributable to income treated

as effectively connected with the

conduct of a trade or business within

the United States (excluding foreign

trade income) and

● Qualify for the 80% deduction

provided in section 245(c)(1)(B).

Line 8, Column (a). Enter dividends

that are received from wholly owned

foreign subsidiaries and that are

eligible for the 100% deduction

provided in section 245(b).

In general, the deduction under

section 245(b) applies to dividends

paid out of the earnings and profits

of a foreign corporation for a tax year

during which:

● All of its outstanding stock is owned

(directly or indirectly) by the domestic

cooperative receiving the dividends

and

● All of its gross income from all

sources is effectively connected with

the conduct of a trade or business

within the United States.

Line 9, Column (c)—Limitation on

dividends-received deduction.

Generally, line 9, column (c) may not

exceed the amount from the

worksheet below. However, in a year

in which an NOL occurs, this

limitation does not apply even if the

loss is created by the

dividends-received deduction. See

sections 172(d) and 246(b).

Line 10, Column (a). Enter

dividends from FSCs that are

attributable to foreign trade income

and that are eligible for the 100%

deduction provided in section

245(c)(1)(A).

Line 11, Columns (a) and (c). Enter

only those dividends that qualify

under section 243(b) for the 100%

dividends-received deduction

described in section 243(a)(3).

Cooperatives taking this deduction

are subject to the provisions of

section 1561.

Note: The 100% deduction does not

apply to affiliated group members that

are joining in the filing of a

consolidated return.

Line 12, Column (a). Enter foreign

dividends not reportable on lines 3,

6, 7, 8, or 10 of column (a). Include

on line 12 the cooperative's share of

the ordinary earnings of a qualified

electing fund from Form 8621, Return

by a Shareholder of a Passive

Foreign Investment Company or

Qualified Electing Fund, line 6c.

Line 13, Column (a). Include income

constructively received from

controlled foreign corporations under

subpart F. This amount should equal

the total of amounts reported on

Schedule I, Form 5471.

Line 14, Column (a). Include

gross-up for taxes deemed paid

under sections 902 and 960.

Line 15, Column (a). Enter taxable

distributions from an IC-DISC or

former DISC that are designated as

not eligible for a dividends-received

deduction.

Worksheet for Schedule C, line 9

(keep for your records)

1. Refigure line 28, page 1, Form 990-C,

without any adjustment under section

1059 and without any capital loss

carryback to the tax year under

section 1212(a)(1) ..............................

2. Complete lines 10 and 11, column (c)

and enter the total here......................

3. Subtract line 2 from line 1..................

4. Multiply line 3 by 80% ........................

5. Add lines 2, 5, 7, and 8, column (c)

and the portion of the deduction on

line 3, column (c) that is attributable

to dividends received from

20%-or-more-owned corporations......

6. Enter the smaller of line 4 or line 5.

If line 5 is greater than line 4, stop

here; enter the amount from line 6 on

line 9, column (c). Do not complete

the rest of this worksheet

7. Enter the total amount of dividends

received from 20%-or-more-owned

corporations that are included on

lines 2, 3, 5, 7, and 8, column (a)......

8. Subtract line 7 from line 3..................

9. Multiply line 8 by 70% ........................

10. Subtract line 5 from line 9, column (c). 11. Enter the smaller of line 9 or line 10..

12. Dividends-received deduction after

limitation (section 246(b)). Add lines

6 and 11. Enter the result here and

on line 9, column (c)...........................

Page 15
No deduction is allowed under

section 243 for a dividend from an

IC-DISC or former DISC (as defined

in section 992(a)) to the extent the

dividend:

1. Is paid out of the cooperative's

accumulated IC-DISC income or

previously taxed income or

2. Is a deemed distribution under

section 995(b)(1).

Line 16, Column (a). Include the

following:

1. Dividends (other than capital

gain dividends and exempt-interest

dividends) that are received from

RICs that are not subject to the 70%

deduction.

2. Dividends from tax-exempt

organizations.

3. Dividends (other than capital

gain dividends) received from a REIT

that, for the tax year of the trust in

which the dividends are paid, qualifies

under sections 856 through 860.

4. Dividends not eligible for a

dividends-received deduction

because of the holding period of the

stock or an obligation to make

corresponding payments with respect

to similar stock.

Two situations in which the

dividends-received deduction will not

be allowed on any share of stock are:

● If the cooperative held it for less

than 46 days during the 90-day period

beginning 45 days before the stock

became ex-dividend with respect to

the dividend (see section

246(c)(1)(A)) or

● To the extent the cooperative is

under an obligation to make related

payments for substantially similar or

related property.

5. Any other taxable dividend

income not properly reported above

(including distributions under section

936(h)(4)).

Schedule H

Deductions and Adjustments

Under Section 1382

Cooperatives may, under section

1388(j)(1), use losses from one or

more allocation units to offset

earnings of one or more other

allocations, as permitted by their

bylaws, but only to the extent that the

earnings and losses are from

business done with or for patrons. If

a cooperative exercises this option, it

must provide the information specified

in section 1388(j)(3) by written notice

to its patrons.

Special rules also apply if a

cooperative has acquired the assets

of another cooperative under a

section 381(a) transaction. See

section 1388(j) for more information.

Cooperatives may net earnings and

losses under section 1388(j) and still

be eligible for tax-exempt treatment.

See section 521(b)(6).

Note: Lines 1 and 2 apply only to

section 521 cooperatives.

Line 1. Enter the amount actually or

constructively paid as dividends

during the tax year on:

● Common stock (whether voting or

nonvoting),

● Preferred stock,

● Capital retain certificates,

● Revolving fund certificates,

● Letters of advice, or

● Other documentary evidence of a

proprietary interest in the cooperative

association.

See Regulations section

1.1382-3(b) for more information.

Line 2. Enter amounts paid on a

patronage basis to patrons from

nonpatronage income. Payment may

be in:

● Money,

● Qualified written notices of

allocation, or

● Other property (except nonqualified

written notices of allocation).

 The amounts must be paid during

the payment period that begins on the

first day of the tax year and ends on

the 15th day of the 9th month after

the end of the tax year in which the

income was earned.

Nonpatronage income includes

incidental income from sources not

directly related to:

● Marketing,

● Purchasing,

● Service activities of the cooperative

(such as income from the lease of

premises, investments, or from the

sale or exchange of capital assets),

or

● Income from business done with or

for the U.S. Government, or any of its

agencies.

See Patronage dividends below

for a definition of “qualified written

notice of allocation.” See section

1382(c)(2)(B) for deductibility of

amounts paid in redemption of

nonqualified written notices of

allocation.

Line 3. To be deductible, patronage

dividends must be paid during the

payment period that begins on the

first day of the tax year in which the

patronage occurs and ends on the

15th day of the 9th month after the

end of that tax year.

See sections 1382(e) and (f) for

special rules for the time when

patronage occurs if products are

marketed under a pooling

arrangement, or if earnings are

includible in the gross income of the

cooperative for a tax year after the

year in which the patronage occurred.

Patronage dividends include any

amount paid to a patron by a

cooperative based on the quality or

value of business done with or for that

patron under a pre-existing obligation

of the cooperative to pay that amount.

The amount is determined by

reference to the net earnings of the

organization from business done with

or for its patrons.

Patronage dividends may be in:

● Money,

● Qualified written notices of

allocation, or

● Other property (except nonqualified

written notices of allocation).

A written notice of allocation

means:

● Any capital stock,

● Revolving fund certificate,

● Retain certificate,

● Certificate of indebtedness,

● Letter of advice, or

● Other written notice, which states

the dollar amount allocated to the

patron by the cooperative and the

part, if any, which is a patronage

dividend.

 In general, a qualified written

notice of allocation is a written

notice of allocation that is:

● Paid as part of a patronage

dividend in money or by qualified

check equal to at least 20% of the

patronage dividend and

● One of the following conditions is

met.

1. The patron must have at least

90 days from the date the written

notice of allocation is paid to redeem

it in cash, and must receive written

notice of the right of redemption at the

time the patron receives the

allocation; or 

2. The patron must agree to have

the allocation treated as

constructively received and

reinvested in the cooperative. See

section 1388(c)(2) and related

regulations for information on how the

consent must be made.

If a written notice of allocation does

not qualify, no deduction is allowable

at the time it is issued. However, the

cooperative is entitled to a deduction

or refund of tax when the nonqualified

written notice of allocation is finally

redeemed, if that notice was paid as

a patronage dividend during the

payment period for the tax year

during which the patronage occurred.

The deduction or refund is allowed,

Page 16
but only to the extent that amounts

paid to redeem the nonqualified

written notice of allocation are paid in

money or other property (other than

written notices of allocation). They

cannot be more than the stated dollar

amounts of the nonqualified written

notice of allocation. See section

1382(b) and related regulations.

See Rev. Rul. 81-103, 1981-1 C.B.

447, for the redemption of

nonqualified written notices of

allocation issued to patrons by a

payment of cash and a crediting of

accounts receivable due from

patrons.

Note: See section 1383 for special

rules for figuring the cooperative's tax

in the year nonqualified written

notices of allocation are redeemed.

The cooperative is entitled to:

(a) A deduction in the tax year the

nonqualified written notices of

allocation are redeemed (if permitted

under section 1382(b)(2) or (4) or

section 1382(c)(2)(B)) or

(b) A tax credit based on a

recomputation of tax for the year(s)

the nonqualified written notices of

allocation were issued. See

instructions for line 32f.

Amounts paid to patrons are not

patronage dividends if they are paid:

1. Out of earnings not from

business done with or for patrons;

2. Out of earnings from business

done with or for other patrons to

whom no amounts or smaller

amounts are paid for substantially

identical transactions;

3. To redeem capital stock,

certificates of indebtedness, revolving

fund certificates, retain certificates,

letters of advice, or other similar

documents; or

4. Without reference to the net

earnings of the cooperative

organization from business done with

or for its patrons.

Schedule J

Tax Computation

Note: Members of a controlled group

must attach a statement showing the

computation of the tax entered on line

3.

Lines 1 and 2

Members of a controlled group. A

member of a controlled group, as

defined in section 1563, must check

the box on line 1 and complete lines

2a and 2b of Schedule J.

Line 2a. Members of a controlled

group are entitled to share one

$50,000, one $25,000, and one

$9,925,000 taxable income bracket

amount (in that order) on line 2a.

When a controlled group adopts or

later amends an apportionment plan,

each member must attach to its tax

return a copy of its consent to this

plan.

The copy (or an attached

statement) must show the part of the

amount in each taxable income

bracket apportioned to that member.

See Regulations section 1.1561-3(b)

for other requirements and for the

time and manner of making the

consent.

Equal apportionment plan. If no

apportionment plan is adopted,

members of a controlled group must

divide the amount in each taxable

income bracket equally among

themselves. For example, controlled

group AB consists of Cooperative A

and Cooperative B. They do not elect

an apportionment plan. Therefore,

each cooperative is entitled to:

● $25,000 (one-half of $50,000) on

line 2a(1),

● $12,500 (one-half of $25,000) on

line 2a(2), and

● $4,962,500 (one-half of

$9,925,000) on line 2a(3).

Unequal apportionment plan.

Members of a controlled group may

elect an unequal apportionment plan

and divide the taxable income

brackets as they want. There is no

need for consistency among taxable

income brackets. Any member may

be entitled to all, some, or none of the

taxable income bracket. However, the

total amount for all members cannot

be more than the total amount in each

taxable income bracket.

Line 2b. Members of a controlled

group are treated as one group to

figure the applicability of the

additional 5% tax and the additional

3% tax. If an additional tax applies,

each member will pay that tax based

on the part of the amount used in

each taxable income bracket to

reduce that member's tax. See

section 1561(a). If an additional tax

applies, attach a schedule showing

the taxable income of the entire group

and how the cooperative figured its

share of the additional tax.

Line 2b(1). Enter the cooperative's

share of the additional 5% tax on line

2b(1).

Line 2b(2). Enter the cooperative's

share of the additional 3% tax on line

2b(2).

Line 3

Most cooperatives figure their tax by

using the Tax Rate Schedule below.

Exceptions apply to members of a

controlled group (see the worksheet

above). See the instructions below for

more information.

Tax Computation Worksheet for

Members of a Controlled Group

(keep for your records)

Note: Each member of a controlled group must

compute the tax using this worksheet.

1. Enter taxable income (line 30, page

1) .........................................................

2. Enter line 1 or the cooperative's share

of the $50,000 taxable income

bracket, whichever is less ..................

3. Subtract line 2 from line 1..................

4. Enter line 3 or the cooperative's share

of the $25,000 taxable income

bracket, whichever is less ..................

5. Subtract line 4 from line 3..................

6. Enter line 5 or the cooperative's share

of the $9,925,000 taxable income

bracket, whichever is less ..................

7. Subtract line 6 from line 5..................

8. Multiply line 2 by 15% ........................

9. Multiply line 4 by 25% ........................

10. Multiply line 6 by 34% ........................

11. Multiply line 7 by 35% ........................

12. If the taxable income of the controlled

group exceeds $100,000, enter this

member's share of the smaller of: 5%

of the taxable income in excess of

$100,000, or $11,750. See

Instructions for line 2b below..........

13. If the taxable income of the controlled

group exceeds $15 million, enter this

member's share of the smaller of: 3%

of the taxable income in excess of

$15 million, or $100,000. See

Instructions for line 2b below..........

14. Add lines 8 through 13. Enter here

and on Schedule J, line 3. .................

Page 17
Deferred tax under section 1291.

If the cooperative was a shareholder

in a passive foreign investment

company (PFIC), and the cooperative

received an excess distribution or

disposed of its investment in the PFIC

during the year, it must include the

total increase in taxes due under

section 1291(c)(2) in the amount

entered on line 3, Schedule J. On the

dotted line next to line 3, Schedule J,

write “Section 1291” and the amount.

Do not include on line 3 any interest

due under section 1291(c)(3).

Instead, show the amount of interest

owed in the bottom margin of page

1, Form 990-C, and write “Section

1291 interest.” For details, see Form

8621.

Line 4. Alternative minimum tax.

Unless the cooperative is treated as

a small corporation exempt from

alternative minimum tax (AMT), it may

owe AMT if it has any of the

adjustments and tax preference items

listed on Form 4626, Alternative

Minimum Tax—Corporations. The

cooperative must file Form 4626 if its

taxable income (loss) combined with

these adjustments and tax preference

items is more than the smaller of:

● $40,000 or

● The cooperative's allowable

exemption amount (from Form 4626).

For this purpose, taxable income

does not include the NOL deduction.

Get Form 4626 for details.

Exemption for small

corporations. A cooperative is

treated as a small corporation exempt

from the AMT for its tax year

beginning in 2000 if that year is the

cooperative's first tax year in

existence (regardless of its gross

receipts) or:

1. It was treated as a small

corporation exempt from the AMT for

all prior tax years beginning after

1997 and

2. Its average annual gross

receipts for the 3-tax-year period (or

portion thereof during which the

cooperative was in existence) ending

before its tax year beginning in 2000

did not exceed $7.5 million ($5 million

if the cooperative had only 1 prior tax

year).

For more details, see the

Instructions for Form 4626.

Line 6a. Foreign tax credit. To find

out when a cooperative can take the

credit for payment of income tax to a

foreign country or U.S. possession,

see Form 1118, Foreign Tax Credit—

Corporations.

Line 6b—Other credits

Possessions tax credit. The Small

Business Job Protection Act of 1996

repealed the possessions credit.

However, existing credit claimants

may qualify for a credit under the

transitional rules. Get Form 5735,

Possessions Tax Credit (Under

Sections 936 and 30A).

Nonconventional source fuel

credit. A credit is allowed for the sale

of qualified fuels produced from a

nonconventional source. Section 29

contains a definition of qualified fuels,

provisions for figuring the credit, and

other special rules. Attach a separate

schedule to the return showing the

computation of the credit.

Qualified electric vehicle (QEV)

credit. Include on line 6b any credit

from Form 8834, Qualified Electric

Vehicle Credit. Vehicles that qualify

for this credit are not eligible for the

deduction for clean-fuel vehicles

under section 179A.

Line 6c. General business credit.

Complete this line if the cooperative

can take any of the following credits.

Complete Form 3800, General

Business Credit, if the cooperative

has two or more of these credits

(other than the empowerment zone

employment credit), general credits

from an electing large partnership, a

general business credit carryforward

or carryback (other than the

empowerment zone employment

credit), a trans-Alaska pipeline liability

fund credit, or a passive activity credit

(other than the low-income housing

credit or the empowerment zone

employment credit). Enter the

amount of the general business credit

on line 6c, and check the box for

Form 3800.

If the cooperative has only one

credit, enter on line 6c, the amount

of the credit from the form. Also be

sure to check the appropriate box for

that form.

Note: Any excess energy investment

credit, work opportunity credit, Indian

employment credit, empowerment

zone credit, employment credit, or

welfare-to-work credit not used by the

cooperative (because of the tax

liability limitation) must be passed

through to the patrons. These credits

cannot be carried back or over by the

cooperative. See Forms 3468, 5884,

8844, 8845, and 8861 for details.

Form 3468, Investment Credit.

Form 5884, Work Opportunity

Credit.

Form 6478, Credit for Alcohol Used

as Fuel.

Form 6765, Credit for Increasing

Research Activities.

Form 8586, Low-income Housing

Credit.

Form 8820, Orphan Drug Credit.

Form 8826, Disabled Access

Credit.

Form 8830, Enhanced Oil

Recovery Credit.

Form 8835, Renewable Electricity

Production Credit.

Form 8844, Empowerment Zone

Employment Credit.

Note: Although the empowerment

zone employment credit is a

component of the general business

credit, it is figured separately and is

not carried to Form 3800.

Form 8845, Indian Employment

Credit.

Form 8846, Credit for Employer

Social Security and Medicare Taxes

Paid on Certain Employee Tips.

Form 8847, Credit for Contributions

to Selected Community Development

Corporations.

Form 8861, Welfare-to-Work

Credit.

Line 6d. Credit for prior year

minimum tax. To figure the

minimum tax credit and any

carryforward of that credit, use Form

8827, Credit for Prior Year Minimum

Tax— Corporations.

Also see Form 8827 if any of the

cooperative's 1999 nonconventional

source fuel credit, orphan drug credit,

or qualified electric vehicle credit was

disallowed solely because of the

tentative minimum tax limitation. See

section 53(d).

Line 9—Recapture Taxes

Recapture of investment credit. If

the cooperative disposed of

investment credit property or changed

its use before the end of its useful life

or recovery period, see Form 4255,

Recapture of Investment Credit, for

details.

Recapture of low-income housing

credit. If the cooperative disposed

of property (or there was a reduction

in the qualified basis of the property)

for which it took the low-income

housing credit, see Form 8611,

Recapture of Low-Income Housing

Credit.

Tax Rate Schedule

If taxable income on line 30, page 1,

Form 990-C is:

Over— But notover— Tax is:

Of the

amount

over—

$0 $50,000 15% $0

50,000 75,000 $ 7,500 + 25% 50,000

75,000 100,000 13,750 + 34% 75,000

100,000 335,000 22,250 + 39% 100,000

335,000 10,000,000 113,900 + 34% 335,000

10,000,000 15,000,000 3,400,000 + 35% 10,000,000

15,000,000 18,333,333 5,150,000 + 38% 15,000,000

18,333,333 - - - - - 35% 0

Page 18
Recapture of qualified electric

vehicle (QEV) credit. The

cooperative must recapture part of

the QEV credit it claimed in a prior

year, if, within 3 years of the date the

vehicle was placed in service, it

ceases to qualify for the credit. See

Regulations section 1.30-1 for details

on how to figure the recapture.

Include the amount of the recapture

in the total for line 9, Schedule J. To

the left of the line 9 entry space, write

“QEV recapture” and the amount.

Recapture of Indian employment

credit. Generally, if an employer

terminates the employment of a

qualified employee less than 1 year

after the date of initial employment,

any Indian employment credit allowed

for a prior tax year by reason of

wages paid or incurred to that

employee must be recaptured. For

details, see Form 8845, and section

45A. Include the amount of the

recapture in the total for line 9,

Schedule J. On the dotted line next

to the entry space, write “45A” and

the amount.

Line 10. Total Tax. Other tax and

interest amounts may be included in

or subtracted from the total tax

reported on line 10.

Include in the total for line 10:

● Interest on deferred tax attributable

to certain nondealer installment

obligations (section 453A(c)),

● Interest on deferred tax on

installment sales of certain

timeshares and residential lots

(section 453(l)(3)),

● Interest due on deferred gain under

section 1260(b), and

● For shareholders in qualified

electing funds, deferred tax due upon

the termination of a section 1294

election (see Form 8621, Part IV).

Subtract from the total for line10

the deferred tax on the cooperative's

shares of the undistributed earnings

of a qualified electing fund (see Form

8621, Part II).

How to report. Attach a schedule

showing your computation of each

item included in or subtracted from

the total for line 10. On the dotted line

next to line 10, enter the amount of

tax or interest and:

● Identify it as tax or interest.

● Specify the code section that

applies.

Example. To show $50 of interest

due on deferred tax on the installment

sale of a timeshare, enter “Sec.

453(I)(3) interest – $50.”

If you figured the tax or interest

using another form (e.g., Form 8621),

see the instructions for that form to

find out how to report the amount and

what to write on Schedule J, line 10.

Schedule L

Balance Sheets per Books

The balance sheet should agree with

the cooperative's books and records.

Include certificates of deposit as cash

on line 1, Schedule L.

Line 5. Tax-exempt securities.

Include on this line:

1. State and local government

obligations, the interest on which is

excludable from gross income under

section 103(a) and

2. Stock in a mutual fund or other

RIC that distributed exempt-interest

dividends during the tax year of the

cooperative.

Line 24. Adjustments to

shareholders' equity. Some

examples of adjustments to report on

this line include:

● Unrealized gains and losses on

securities held “available for sale.”

● Foreign currency translation

adjustments.

● The excess of additional pension

liability over unrecognized prior

service cost.

● Guarantees of employees stock

(ESOP) debt.

● Compensation related to employee

stock award plans.

If the total adjustment to be entered

on line 24 is a negative amount, enter

the amount in parentheses.

Schedule M-1

Reconciliation of Income (Loss)

per Books With Income per

Return

Line 5c. Travel and entertainment.

Include on line 5c any of the

following:

● 50% of meals and entertainment

not allowed under section 274(n).

● Expenses for the use of an

entertainment facility.

● The part of business gifts over $25.

● Expenses of an individual in excess

of $2,000, which are allocable to

conventions on cruise ships.

● Employee achievement awards

over $400.

● The cost of entertainment tickets

over their face value (also subject to

50% disallowance under section

274(n)).

● The cost of skyboxes over the face

value of nonluxury box seat tickets.

● The part of luxury water travel not

allowed under section 274(m).

● Expenses for travel as a form of

education.

● Other expenses for travel and

entertainment not allowed as a

deduction.

For more information, see Pub.

542.

Line 7. Tax-exempt interest.

Include as interest on line 7, any

tax-exempt dividends received as a

shareholder in a mutual fund or other

RIC.

Schedule N

Other Information

The following instructions apply to

items 1 through 20 on Form 990-C,

page 5, Schedule N. Be sure to

complete all the items that apply to

the cooperative.

Question 13

Foreign financial account. Check

the “Yes” box if either 1 or 2 below

applies to the cooperative. Otherwise,

check the “No” box.

1. At any time during the 2000

calendar year the cooperative had an

interest in or signature or other

authority over a bank, securities, or

other financial account in a foreign

country (see Form TD F 90–22.1,

Report of Foreign Bank and Financial

Accounts); and

● The combined value of the

accounts was more than $10,000 at

any time during the calendar year and

● The account was not with a U.S.

military banking facility operated by a

U.S. financial institution.

2. The cooperative owns more

than 50% of the stock in any

corporation that would answer “Yes”

to item 1 above.

If “Yes” is checked for this question:

● Enter the name(s) of the foreign

country or countries. Attach a

separate sheet if more space is

needed

● File Form TD F 90-22.1 by June

30, 2001, with the Department of the

Treasury at the address shown on the

form. Do not file it with Form 990-C.

You can order Form TD F 90-22.1

by calling 1-800-TAX-FORM

(1-800-829-3676) or you can

download it from the IRS Web Site at

www.irs.gov.

.

Question 14

The cooperative may be required to

file Form 3520, Annual Return To

Report Transactions with Foreign

Page 19
Trusts and Receipt of Certain Foreign

Gifts, if:

● It directly or indirectly transferred

money or property to a foreign trust.

For this purpose, any U.S. person

who created a foreign trust is

considered a transferor.

● It is treated as the owner of any part

of the assets of a foreign trust under

the grantor trust rules.

● It received a distribution from a

foreign trust.

For more information, see the

Instructions for Form 3520.

Note: An owner of a foreign trust

must ensure that the trust files an

annual information return on Form

3520-A, Annual Information Return of

Foreign Trust with a U.S. Owner. For

details, see Form 3520-A.

Item 15

Show any tax-exempt interest

received or accrued. Include any

exempt-interest dividends received as

a shareholder in a mutual fund or

other RIC.

Question 17

Check the “Yes” box for question 17

if:

1. The cooperative is a subsidiary

in an affiliated group (defined below),

but is not filing a consolidated return

for the tax year with that group or

2. The cooperative is a subsidiary

in a parent-subsidiary controlled

group (defined below).

Any cooperative that meets either

of the requirements above should

check the “Yes” box. This applies

even if the cooperative is a subsidiary

member of one group and the parent

corporation of another.

Note: If the cooperative is an

“excluded member” of a controlled

group (see section 1563(b)(2)), it is

still considered a member of a

controlled group for this purpose.

Affiliated group. The term “affiliated

group” means one or more chains of

includible corporations (section

1504(a)) connected through stock

ownership with a common parent

corporation. The common parent

must be an includible corporation and

the following requirements must be

met:

1. The common parent must own

directly stock that represents at least

80% of the total voting power and at

least 80% of the total value of the

stock of at least one of the other

includible corporations.

2. Stock that represents at least

80% of the total voting power, and at

least 80% of the total value of the

stock of each of the other

corporations (except for the common

parent) must be owned directly by at

least one of the other includible

corporations.

For this purpose, stock generally

does not include any stock that (a) is

nonvoting, (b) is nonconvertible, (c)

is limited and preferred as to

dividends and does not participate

significantly in corporate growth, and

(d) has redemption and liquidation

rights that do not exceed the issue

price of the stock (except for a

reasonable redemption or liquidation

premium). See section 1504(a)(4).

Parent-subsidiary controlled

group. The term “parent-subsidiary

controlled group” means one or more

chains of corporations connected

through stock ownership (section

1563(a)(1)). Both of the following

requirements must be met:

1. 80% of the total combined

voting power of all classes of stock

entitled to vote or at least 80% of the

total value of all classes of stock of

each corporation in the group (except

the parent) must be owned by one or

more of the other corporations in the

group.

2. The common parent must own

at least 80% of the total combined

voting power of all classes of stock

entitled to vote or at least 80% of the

total value of all classes of stock of

at least one of the other corporations

in the group. Stock owned directly

by other members of the group is not

counted when computing the voting

power or value.

See section 1563(d)(1) for the

definition of “stock” for purposes of

determining stock ownership above.

Item 19

Check the box for question 19 if the

cooperative elects under section

172(b)(3) to forego the carryback

period for a net operating loss (NOL).

If this box is checked, do not attach

the statement described in Temporary

Regulations section 301.9100-12T(d).

Item 20

Enter the amount of the net operating

loss (NOL) carryover to the tax year

from prior years, even if some of the

loss is used to offset income on this

return. The amount to enter is the

total of all NOLs generated in prior

years but not used to offset income

(either as a carryback or carryover) in

a tax year prior to 2000. Do not

reduce the amount by any NOL

deduction reported on line 29a.

Pub. 536 has a worksheet for

figuring a cooperative's NOL

carryover.

Paperwork Reduction Act Notice.

We ask for the information on this

form to carry out the Internal Revenue

laws of the United States. You are

required to give us the information.

We need it to ensure that you are

complying with these laws and to

allow us to figure and collect the right

amount of tax.

You are not required to provide the

information requested on a form that

is subject to the Paperwork Reduction

Act unless the form displays a valid

OMB control number. Books or

records relating to a form or its

instructions must be retained as long

as their contents may become

material in the administration of any

Internal Revenue law. Generally, tax

returns and return information are

confidential, as required by section

6103.

The time needed to complete and

file this form will vary depending on

individual circumstances. The

estimated average time is:

If you have comments concerning

the accuracy of these time estimates

or suggestions for making this form

simpler, we would be happy to hear

from you. You can write to the Tax

Forms Committee, Western Area

Distribution Center, Rancho Cordova,

CA 95743-0001.

Do not send the tax form to this

office. Instead, see Where To File on

page 2.

Recordkeeping ............................. 77 hr., 58 min.

Learning about the law or the

form ............................................... 23 hr., 46 min.

Preparing the form....................... 40 hr., 59 min.

Copying, assembling, and

sending the form to the IRS ....... 4 hr., 17 min.

Page 20