Question 1

What is a patronage dividend?

Accepted Answer

A patronage dividend is a distribution from a cooperative based on the amount of business a member does with the cooperative. It is generally taxable as ordinary income.

Question 2

Where do I report cooperative distributions?

Accepted Answer

Report patronage dividends as business income on Schedule C or Schedule F (for farm cooperatives). Include any tax withheld on your Form 1040.

Question 3

Are all cooperative distributions taxable?

Accepted Answer

Most are taxable. Written notices of allocation are taxable when received if you can redeem them at face value. Nonqualified notices are taxable when redeemed.

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