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Understanding Per-Unit Retain Allocation: A Legal Overview
Definition & Meaning
The term "per-unit retain allocation" refers to a specific type of allocation made by certain organizations, particularly cooperatives, to their patrons. This allocation is based on the products marketed on behalf of the patron and is determined without considering the organization's overall net earnings. Essentially, it is an agreement between the organization and the patron that specifies a fixed amount for the allocation.
Table of content
Legal Use & context
Per-unit retain allocations are relevant in the context of cooperative organizations, particularly in agricultural or consumer cooperatives. They are used to distribute profits or earnings from products sold on behalf of patrons. This term is significant in tax law, as it can affect how cooperatives report income and allocate earnings to members. Users may find legal forms related to cooperative agreements or profit-sharing useful for managing these allocations.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A dairy cooperative sells milk on behalf of its members. The cooperative decides to allocate a fixed amount per gallon sold to each member, regardless of the cooperative's overall profits. This is a per-unit retain allocation.
Example 2: A grain cooperative markets corn for its farmers. Each farmer receives a set allocation based on the volume of corn sold, established through an agreement with the cooperative. (hypothetical example)
Relevant laws & statutes
Per-unit retain allocations are defined under 26 USCS § 1388, which is part of the Internal Revenue Code that governs cooperatives and their patrons. This statute outlines the conditions under which these allocations can be made and how they are treated for tax purposes.
Comparison with related terms
Term
Definition
Difference
Retained Earnings
Profits that a company retains for reinvestment instead of distributing to shareholders.
Retained earnings are based on overall profits, while per-unit retain allocations are fixed amounts not tied to net earnings.
Patronage Dividend
A distribution of earnings to members based on their business with the cooperative.
Patronage dividends may vary based on profits, whereas per-unit retain allocations are fixed amounts.
Common misunderstandings
What to do if this term applies to you
If you are involved with a cooperative and are receiving or managing per-unit retain allocations, it is important to understand the terms of your agreement with the organization. You may want to consult legal forms related to cooperative agreements or seek professional legal advice if you have specific questions about your situation. US Legal Forms offers templates that can help you navigate these agreements effectively.
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Common in: Agricultural and consumer cooperatives.
Key takeaways
Frequently asked questions
It is a fixed allocation made by cooperatives to patrons based on products marketed for them, independent of the organization's net earnings.
Per-unit retain allocations have specific tax implications as outlined in the Internal Revenue Code, affecting how cooperatives report income.
Yes, with the right tools and legal forms, you can manage per-unit retain allocations effectively, but consider professional help for complex situations.