LEGAL PHASES OF COOPERATIVE ASSOCIATIONS. 53 



vent its breach, or both, inasmuch as the association is prevented from 

 going into the open market to buy the produce involved. 



It has been urged in certain cases that specific performance of a 

 contract would not be decreed or an injunction issued to restrain its 

 breach on the ground that the contract involved provided for liqui- 

 dated damages. This, however, is not the general rule. Although 

 a contract provides for liquidated damages, an injunction will be 

 issued to restrain its breach, or specific performance will be decreed, 

 if the other facts involved warrant such relief, unless the contract 

 shows that damages were to be accepted in lieu of performance of the 

 contract.^^ 



Statutes have been j)assed in many of the States dealing with the 

 remedies of injunction and specific performance, and these should be 

 examined to determine their effect and scope and to ascertain how 

 they have modified or altered the general rules on these subjects. 



INCOME TAXES. 



Are cooperative associations liable for Federal income taxes, and 

 what must they do to establish their claim to exemption from such 

 taxes? The answers to these questions will be found in the extracts 

 from the Federal revenue act of 1921, and from the regulations issued 

 by the Treasury Department relative to the collection of income taxes 

 under the act, which are here given. 



Under the revenue act of 1921, any corporation, and any organiza- 

 tion, cooperative or otherwise, which properly is comprehended 

 within the meaning of the term "association," is held to be subject 

 to income tax unless such organization comes within one of the 

 classes of organizations specifically exempted from taxation under 

 section 231 of the act. That section provides in part that the fol- 

 lowing organizations shall be exempt from taxes under this title : 



(10) Farmers' or other mutual hail, cyclone, or fire insurance companies, 

 mutual ditch or irrigation companies, mutual or cooperative telephone com- 

 panies, or like organizations of a purely local character, the income of which 

 consists solely of assessments, dues, and fees collected from members for the 

 sole purpose of meeting expenses ; 



(11) Farmei's', fruit growers', or like associations, organized and operated 

 as sales agents for the purpose of marketing the products of members and 

 turning back to them the proceeds of sales, less the necessary selling ex- 

 penses, on the basis of the quantity of produce furnished by them ; or organized 

 and operated as purchasing agents for the purpose of purchasing supplies and 

 equipment for the use of members and turning over such supplies and equip- 

 ment to such members at actual cost, plus necessary expenses. 



53 Cincinnati-Louisville Theater Co. v. Masonic W. & O. H. and I., 272 Fed. 637 ; 

 Washington Cranberry Growers' Ass'n. v. Moore, (Wash.) 201 Pac. 773, 204 Pac. 811.. 



