§1383 Computation of tax where cooperative redeems nonqualified written notices of allocation or nonqualified per-unit retain certificates

Summary

When a cooperative claims a deduction for money it paid to redeem certain nonqualified written notices of allocation or nonqualified per-unit retain certificates, its tax for the year must be the smaller of two amounts. One amount is the tax worked out after taking the deduction. The other amount is the tax worked out without the deduction, minus the amount of tax saved in earlier years if those nonqualified items had been treated as qualified. If the second way makes the result less than zero because past tax savings are bigger than the tax without the deduction, the extra is treated as a tax payment made on the last day taxes were due and will be refunded or credited like an overpayment. When measuring past tax savings, use the dollar amounts that were allowed as deductions for the redemptions. If the cooperative’s tax is set by the second method, that deduction cannot be used for any other tax rules except for this calculation.