Eide Bailly’s Kautzman discusses tax consequences

Pat Kautzman, CPA and Tax Partner at Eide Bailly, gave a presentation to help members prepare for the anticipated sale of the Cooperative's ownership interest in ProGold LLC, expected to take place on January 1, 2027. Because Golden Growers is taxed as a partnership, each member's share of the taxable gain from the sale will appear on their 2027 Schedule K-1, which should be issued in early 2028.

Kautzman explained that the total gain from the sale will include several tax components, each subject to different tax rates. Portions of the gain will be treated as: Ordinary income; Section 1250 gain (taxed at 25%); and Capital gain (taxed at 0%, 15%, or 20%, depending on income level). The difference between the final liquidation amount received and each member's tax basis in their units will determine if they recognize a capital gain or loss.

On September 1, 2009, Golden Growers converted from ND cooperative to a Minnesota Section 308B cooperative. At the time, the tax basis of members' units were reset to the fair market value, approximately $2.85 per unit. This was a taxable event that may have resulted in a tax gain or loss at that time. Since then, each member's basis has changed annually, reflecting Golden Growers' allocated income, losses, and distributions. "If you have not acquired units since the conversion of 2009, the capital account on your Schedule K-1 should be an accurate reflection of your tax basis," stated Kautzman. "Members who purchased, inherited, or sold units since then will need additional information to calculate the tax basis of their units."

Kautzman emphasized that each member is responsible for tracking their own tax basis. Neither Golden Growers nor Eide Bailly maintains those records. He advised members to assemble prior Schedule K-1 forms, records of unit purchases and sales, and documentation of any units acquired through gifts or inheritance. Inherited units generally receive a "step-up" in basis to fair market value, while gifted units carry over the donor's basis.

Using several examples, Kautzman illustrated how members' tax results could vary widely depending on when and how they acquired their units.

He concluded by encouraging all members to begin recordkeeping now to simplify tax reporting when the sale and liquidation occur. Early preparation, he said, will help ensure accurate filings and reduce surprises at tax time. Members should consult their own tax professionals with questions.

Pat Kautzman's slide presentation is below.