Rev. Rul. 55-611

Advice has been requested whether an association which purchases supplies and equipment for its members who are fishermen is a farmers' purchasing association within the intendment of section 521(b)(1) of the Internal Revenue Code of 1954.

The instant organization was incorporated for the purpose of engaging in any activity involving or relating to collecting, catching, taking, planting, producing, buying, receiving, garding, processing, packing, storing, financing, preparing for market, handling, marketing, selling, and/or distributing of aquatic products, or conducive to buying, selling or otherwise handling fishery and marine supplies and equipment; and for the conduct of any activity deemed to be necessary, convenient, proper or expedient for the accomplishment of such purposes on a cooperative basis for the mutual benefit of its members.

It is contended on behalf of the instant organization that it operates in a manner similar to a farmers' or fruit growers' association or other group of persons, and should be considered a `like association' as that term is used in section 521 of the Code. In this connection, it is pointed out that under the State laws the term `agricultural products' includes fish and salt water sea food and that the State law has recognized the instant association as an agricultural association.

Section 521(b)(1) of the Code relating to exempt farmers' cooperatives reads in part as follows:

* * * The farmers' cooperatives exempt from taxation to the extent provided in subsection (a) are farmers', fruit growers', or like associations organized and operated on a cooperative basis (A) for the purpose of marketing the products of members or other producers, and turning back to them the proceeds of sales, less the necessary marketing expenses, on the basis of either the quantity or the value of the products furnished by them, or (B) for the purpose of purchasing supplies and equipment for the use of members or other persons, and turning over such supplies and equipment to them at actual cost, plus necessary expenses.

An association which is not composed of farmers, fruit growers, or persons engaged in similar pursuits is not exempt under section 521 of the Code unless it could be considered a `like association' within the intendment of that section. The provisions of any State laws are not controlling in determining status for Federal income tax purposes. See Munro L. Lyeth v. Hoey , 305 U.S. 188, Ct. D. 1370, C.B. 1938-2, 208.

An issue similar to that here presented was before the court in Sunset Scavenger Company, Incorporated v. Commissioner , 84 Fed.(2d) 453, Ct. D. 1190, C.B. 1937-1, 202 at 204. In that case the court stated:

We believe, as the Commissioner contends, that under the principle of ejusdam generis , the words `like associations' are limited by the words `farmers' and `fruit growers' and as thus limited mean only such associations as market agricultural products, or purchase supplies and equipment for those who are engaged in producing agricultural products. * * *

It is therefore held that an association which purchases supplies and equipment for its members who are fishermen is not an association of farmers or fruit growers, or a like association within the meaning of section 521(b)(1) of the Internal Revenue Code of 1954 and is not exempt from Federal income tax under such section.

The principles stated herein relative to the application of section 521 of the 1954 Code to an association which purchases supplies and equipment for its members, who are fishermen, applies equally in case of membership in an association composed of oyster growers