Chapter 15 - § 15.10 • LOSSES

• Jurisdiction: Colorado

§ 15.10 • LOSSES

Any program for the building of equity accounts of cooperative members and their subsequent redemption assumes that the cooperative will be profitable. Cooperatives can experience losses from operations for all the same reasons that other business enterprises suffer losses. Handling a cooperative's losses is a complex and difficult subject for the same reasons that losses are complex and difficult for any business; however, the subject is further complicated by the principle that members provide the cooperative's equity capital and they incur the tax consequences that flow therefrom.

From a tax standpoint, although a cooperative can be considered equivalent to a pass-through organization (as are most other business entities, except a C corporation) when net margins (net income) are present, the equivalence disappears in the event a cooperative assumes losses.

When losses occur, the cooperative's board of directors has several choices, some of...