Court Opinion

ID: 4485738
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:33:56.151952+00
Date Added: 2024-06-11T14:54:07.576334
License: Public Domain

Kórner, J., concurring: I concur in the result which the majority has reached in this case, based upon the facts as found, but I think it desirable to add a few comments so that the majority opinion herein will not be misinterpreted. The majority opinion, in footnote 3, refuses to find that this petitioner either is a cooperative organization within the meaning of section 216, or within the meaning of subchapter T of the Code, and therefore does not consider the applicability of those provisions of law to this case. I agree that section 216 has no application to this case, not because the record will not support a holding that this petitioner is a section 216 cooperative (it may or may not be), but because it is irrelevant. Section 216 deals only with certain taxes, interest, and depreciation expense which may be deducted by a tenant stockholder of a housing cooperative. None of those persons are before us as petitioners, and none of those items are in dispute in this case. Thus, this case can be decided without any reference to section 216, or petitioner’s qualification thereunder. The application of subchapter T to this case, however, is a different matter. If this petitioner was being operated on the cooperative basis, within the meaning of section 1381(a)(2), then the provisions of subchapter T attach, and petitioner’s liability is to be determined under those provisions as a matter of law. The application of subchapter T is not elective on the part of either petitioner or respondent. Neither party can avoid the application of the correct law to the facts of the case by failing to plead or argue it. That is the province of the Court. See Park Place, Inc. v. Commissioner, 57 T.C. 767, 769 (1972). We have previously held that low income nonprofit housing corporations, which concededly were cooperatives, are governed by subchapter T, and that those Code provisions preempt other more general Code provisions which otherwise might be applicable. Concord Village, Inc. v. Commissioner, 65 T.C. 142 (1975); Park Place, Inc. v. Commissioner, supra. Here, the majority avoids the question of the applicability of subchapter T by specifically refusing to find that petitioner was operated on the cooperative basis, for lack of adequate facts. There is certainly some support for the proposition that this petitioner was not operated on the cooperative basis, in that the findings of fact would suggest that there is no possibility that any margins or savings which petitioner might realize could ever be rebated to the tenant members of the corporation as patronage refunds. The obligation of the organization to rebate to the patron member, on a patronage basis, the excess of its charges collected from the member over its actual costs of operation, and the right of the patron member to receive such distributions, is the principal factor which distinguishes cooperatives from other forms of business organization, and is the sine qua non of operating on the cooperative basis. See I. Packel, The Organization and Operation of Cooperatives 186-187, 252 (4th ed. 1970).1  Giving proper deference to the trial judge as the finder of facts in this case, I thus concur in the result reached by the majority here, as long as it is clear, as I think it should be, that we are not holding that the provisions of section 277 supersede the provisions of subchapter T in a case where the latter provisions apply. In such a case, I think a different analysis would be required, with at least the possibility that a different result might be reached. Compare Certified Grocers of California, Ltd. v. Commissioner, 88 T.C. 238 (1987); Illinois Grain Corp. v. Commissioner, 87 T.C. 435 (1986), on appeal (7th Cir., Mar. 2, 1987). Whitaker, Hamblen, Jacobs, Wright, Parr, and WILLIAMS, JJ., agree with this concurring opinion.   Art. XII of petitioner’s articles of incorporation, quoted in note 3 of the majority opinion, is not relevant to a determination of this question, since patronage refunds made by a cooperative to its members are not “dividends” at all, either under general law or under sec. 316.