§1383 Computation of Tax Where Cooperative Redeems Nonqualified Written Notices of Allocation or Nonqualified Per-unit Retain Certificates

Summary

When a cooperative deducts money it paid to redeem nonqualified written notices of allocation or nonqualified per‑unit retain certificates, its tax for the year must be the smaller of two numbers. One number is the tax after taking the deduction. The other is the tax without that deduction, minus the tax savings the cooperative would have had in earlier years if those redeemed items had been treated as qualified. If those earlier-years tax savings are bigger than the tax without the deduction, the extra amount counts as a tax payment made on the last day the tax was due and is refunded or credited like an overpayment. The dollar amount treated as “qualified” is the actual redemption amount that was deductible. If the second method is used to set the tax, the deduction cannot be used for any other part of the tax code except for this rule.