# Retained patronage

A term used when buying hardware store.

The part of a co-op's patronage [dividend](https://searchspheresource.com/glossary/dividend) paid in stock or certificates, cashed on the co-op's own schedule.

Rebate income arrives later from the co-op, and in a cooperative not all of it arrives as money. Federal tax law calls the payment a patronage dividend and lets part of it be paid in capital stock, retain certificates or other written notices of allocation. A notice is qualified only when at least twenty percent of the dividend is paid in money and the member has consented, which membership itself can do under a bylaw. The store takes a qualified notice into account at its stated dollar amount in the year it receives it, while the cash waits for the co-op to redeem it. A nonqualified notice has a zero basis, and its redemption is ordinary income. So the co-op equity on a seller's [balance sheet](https://searchspheresource.com/glossary/balance-sheet) is paper, often taxed already, payable when the co-op chooses. Its bylaws decide whether that paper passes to a buyer. A buying group that is not a cooperative corporation sits outside the statute. Price the paper at what it will pay, and when.

Part of: Buying a Hardware Store (https://searchspheresource.com/guides/buying-a-hardware-store)

Source: https://searchspheresource.com/guides/buying-a-hardware-store/terms/retained-patronage
Not dated: The same editorial definitions as the glossary, inside a trade.

Site index for machines: https://searchspheresource.com/llms.txt