### Question
How is the "patronage dividend" defined?


### Answer
The term **patronage dividend** is defined in *26 U.S.C. § 1388* as follows -

> 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

#### Citation:
  - *26 U.S.C. § 1388*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter T-Cooperatives and Their Patrons > PART III-DEFINITIONS; SPECIAL RULES**

