1120-US: Taxable income on Form 1120-C not reduced by the available patronage net operating loss (FAQ)

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Question

Why is the taxable income not being reduced by the available patronage net operating loss?

Answer

Patronage and nonpatronage losses must be calculated separately and carried over or carried back separately. Under Section 1388(j)(1), cooperatives can use losses to offset earnings only to the extent that the earnings and losses are from business done with or for patrons. Any patronage source loss cannot be used to offset nonpatronage income.

Related topic: 1120-US: Form 1120-C - Cooperative associations FAQs

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