In Farmland Industries, Inc. v. Commissioner, the Tax Court confronted the issue of classifying gains and losses realized by a nonexempt agricultural cooperative from sales of stock and section 1231(b) property as either patronage or nonpatronage items. Finding that each transaction directly related to the activities of the cooperative, the court classified the gains and losses as patronage items. In so holding, the court rejected a per se rule that would automatically classify capital gain as nonpatronage income.Part I of this Note describes the test used to distinguish patronage from nonpatronage items and outlines the facts of Farmland. Part II discusses the opinion of the Tax Court. Part III analyzes the court’s rejection of the per se rule and examines the implications of Farmland for patronage income derived from stock sales.