United Grocers, Ltd. v. United States

This is a suit brought by plaintiff, United Grocers, Ltd., against defendant, United States of America, to recover income taxes amounting to $77,736.49, with $16,191.55 interest, which, plaintiff contends, were improperly determined by the Collector of Internal Revenue to be income tax payable for the year 1954.

The Collector assessed the tax upon the ground that certain payments received by the corporation from its members in that year were payments in return for corporate services rendered to its members and, therefore, taxable income, as distinguished from what plaintiff contends were capital contributions from the members to the corporation and, therefore, excludable from corporate income.

Plaintiff is a corporation organized under the laws of California, empowered to engage in a general wholesale and retail grocery and merchandise business and in general business activity.

According to its Articles of Incorporation, it is a cooperative, nonprofit, membership (nonstock) corporation and is formed for the purpose of creating a cooperative buying, marketing and service organization for the benefit of its members; it is not in any way the purpose of the corporation that profits…