 The co-op can't deduct these distributions, and the farmer doesn't include the amount in taxable income. When non-qualified equity is paid out in the future, the farmer has taxable income. Which is better? It depends. Do you want to be taxed up front on cash and equity received and then have a tax-free equity distribution in the future? Or do you prefer to be taxed up front on just the cash amount received and pay tax on the equity later? Co-op tax is complex. Make sure you get good tax advice. This has been the Agricultural Law and Tax Report. I'm Roger McOwen.