PROBLEM:
Three rural cooperative telephone companies purchased spectrum some 10 years earlier with the intention of enhancing telecommunications services to their respective customers, but the enhancements were cost-prohibitive so the spectrum was not used; in year 10, a global telecommunications company purchased the cooperatives’ unused spectrum; the cooperatives were concerned that the sale proceeds constituted taxable income, which would have resulted in a collective tax liability exceeding $1 million
RESOLUTION:
Succeeded in demonstrating to the IRS that the proceeds from the spectrum sale constituted patronage sourced income and, in that regard, was not taxable to the cooperatives; the IRS issued a private letter ruling to each cooperative confirming this finding