Page:United States Statutes at Large Volume 76.djvu/1097

 76 STAT.]

PUBLIC

LAW 87-834-OCT. 16, 1962

1049

"PART III—DEFINITIONS; SPECIAL RULES "Sec. 1388. Definitions; special rules.

"SEC. 1388. DEFINITIONS; SPECIAL RULES. " (a) PATRONAGE DIVIDEND.—For purposes of this subchapter, the term 'patronage dividend' means an amount paid to a patron by an organization to which part I of this subchapter applies— "(1) on the basis of quantity or value of business done with or for such patron, "(2) under an obligation of such organization to pay such amount, which obligation existed before the organization received the amount so paid, and "(3) which is determined by reference to the net earnings of the organization from business done with or for its patrons. Such term does not include any amount paid to a patron to the extent that (A) such amount is out of earnings other than from business done with or for patrons, or (B) such amount is out of earnings from business done with or for other patrons to whom no amounts are paid, or to whom smaller amounts are paid, with respect to substantially identical transactions. " (b) WRITTEN NOTICE or ALLOCATION.—For purposes of this subchapter, the term 'written notice of allocation' means any capital stock, revolving fund certificate, retain certificate, certificate of indebtedness, letter of advice, or other written notice, which discloses to the recipient the stated dollar amount allocated to him by the organization and the portion thereof, if any, which constitutes a patronage dividend. "(c)

QUALIFIED WRITTEN NOTICE OF ALLOCATION.—

"(1) DEFINED.—For purposes of this subchapter, the term 'qualified written notice of allocation' means— " (A) a written notice of allocation which may be redeemed in cash at its stated dollar amount at any time within a period beginning on the date such written notice of allocation is paid and ending not earlier than 90 days from such date, but only if the distributee receives written notice of the right of redemption at the time he receives such written notice of allocation; and " (B) a written notice of allocation which the distributee has consented, in the manner provided in paragraph (2), to take into account at its stated dollar amount as provided in section 1385(a). Such term does not include any written notice of allocation which is paid as part of a patronage dividend or as part of a payment described in section 1382(c)(2)(A), unless 20 percent or more of the amount of such patronage dividend, or such payment, is paid in money or by qualified check. "(2) MANNER OF OBTAINING CONSENT.—A distributee shall consent to take a written notice of allocation into account as provided in paragraph (1)(B) only by— (A) making such consent in writing, " (B) obtaining or retaining membership in the organization after— " (i) such organization has adopted (after the date of the enactment of the Revenue Act of 1962) a bylaw providing that membership in the organization constitutes such consent, and " (ii) he has received a written notification and copy of such bylaw, or

Ante, p. i048. Ante, p. i046.

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