Patronage dividends are essentially recoveries. See
https://www.irs.gov/publications/p525#e ... 1000229391You can think of this type of income as though it were a refund of state taxes paid. It's only taxable to the extent that the taxpayer enjoyed a tax benefit from the item. If it's a refund of amounts paid in the same tax year, it just reduces those amounts, but if the refund arrives after the year of the deduction, then the refund should be reported as income. I'm not clear on what the exact rationale is for this as opposed to reducing some corresponding deduction in the current year, but it's well established that this is the correct treatment (check out the link above).
To the extent that the taxpayer still has some basis in the item in question, the refund will always reduce that basis to nothing before the first dollar of income is recognized. Any income should then be reported either on the schedule where the deduction was originally claimed, if appropriate, or else on line 21.
I would never trust Drake as an authority on the tax treatment of an item. It's not that it does anything incorrectly, it's that there are a whole lot of things that it simply doesn't have an option for that are nevertheless valid. The most frustrating of these for me is getting investment interest from Form 4952 to flow to somewhere besides Schedule A - not only is it not automatic, there's no way to override it either so the client is forced into either claiming this interest below the line or paper filing.