 A farmer patron of an ag co-op must recognize as income the cash and non-cash portion of qualified distributions from the co-op as income. The farmer is treated as having received cash and reinvesting in the co-op, which increases the farmer's equity. When the co-op redeems its equity in the future, the amount the farmer receives will be tax-free. A non-qualified distribution is one where less than 20% of the total distribution is paid in cash.