Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-66

1955-1 C.B. 282

Sec. 165

Sec. 166

Full Text

Rev. Rul. 55-66

Allocations to patrons in document form issued by a cooperative association in accordance with a preexisting agreement may take the form of certificates denoting an investment in the capital of the cooperative or of certificates of indebtedness of the cooperative. In such cases, it is considered that the patron has in effect received in money the face amount of the document and has either reinvested that amount in the capital of the association or allowed the association the use thereof. See Rev. Rul. 54-10, C.B. 1954-1, 24. The bylaws usually disclose the nature of the relationship between the association and its patrons, and hence, whether there has been an investment in capital of or a loan to the association. This relationship is reflected in the type of instrument which a patron receives. By showing whether there has been an investment in capital or a loan, the instrument will indicate whether a loss due to worthlessness upon dissolution or insolvency, of the cooperative which issued it, may be treated as a capital loss or as a bad debt