26 U.S.C. § 562 — Rules applicable in determining dividends eligible for dividends paid deduction
submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 866 words · no verdicts yet
(a) “Dividend” generally includes only section 316 dividends. (b)(1) Except for a section 542 personal holding company, qualifying liquidation distributions are treated as dividends: (A) the part chargeable to post-February 28, 1913 earnings and profits; and (B) distributions under a complete liquidation plan adopted within 24 months, up to the corporation’s taxable-year earnings and profits computed without capital losses. For (A), liquidation includes a section 302 stock redemption, but regulations may exclude a mere holding or investment company that is not a regulated investment company. (b)(2) For a personal holding company completely liquidated within 24 months of adopting its plan, qualifying distributions to corporate distributees are dividends to the extent they represent those distributees’ allocated share of undistributed personal holding company income, computed without this paragraph and section 316(b)(2)(B). (c)(1) Except for a publicly offered regulated investment company or publicly offered REIT, a distribution counts only if it is pro rata, with no forbidden preference among same-class shares or classes. A regulated investment company’s distribution to a shareholder whose initial investment is at least $10,000,000 is not non-pro-rata solely because company administrative-expense reductions increased it. (c)(2) “Publicly offered REIT” means a REIT required to file annual and periodic SEC reports under the Securities Exchange Act of 1934. (d) A distribution by an affiliated-group corporation filing a separate personal-holding-company schedule counts as a dividend if it would count under this section for a non-group recipient. (e)(1) For a REIT, annual earnings and profits, but not accumulated earnings, are increased by qualifying real-property-sale gain included in taxable income and not otherwise included in earnings and profits; section 857(d)(1) applies without subparagraph (B). (e)(2) The Secretary may provide a remedy instead of disqualifying a distribution when a subsection (c) failure is inadvertent or reasonably caused without willful neglect, or is a failure type the Secretary identified as covered by that rule.
(a) “Dividend” generally includes only section 316 dividends. (b)(1) Except for a section 542 personal holding company, qualifying liquidation distributions are treated as dividends: (A) the part chargeable to post-February 28, 1913 earnings and profits; and (B) distributions under a complete liquidation plan adopted within 24 months, up to the corporation’s taxable-year earnings and profits computed without capital losses. For (A), liquidation includes a section 302 stock* redemption, but regulations may exclude a mere holding or investment company that is not a regulated investment company. (b)(2) For a personal holding company completely liquidated within 24 months of adopting its plan, qualifying distributions to corporate distributees are dividends to the extent they represent those distributees’ allocated share of undistributed personal holding company income, computed without this paragraph and section 316(b)(2)(B). (c)(1) Except for a publicly offered regulated investment company or publicly offered REIT, a distribution counts only if it is pro rata, with no forbidden preference among same-class shares* or classes. A regulated investment company’s distribution to a shareholder* whose initial investment is at least $10,000,000 is not non-pro-rata solely because company administrative-expense reductions increased it. (c)(2) “Publicly offered REIT” means a REIT required to file annual and periodic SEC reports under the Securities Exchange Act of 1934. (d) A distribution by an affiliated-group corporation* filing a separate personal-holding-company schedule counts as a dividend if it would count under this section for a non-group recipient. (e)(1) For a REIT, annual earnings and profits, but not accumulated earnings, are increased by qualifying real-property-sale gain included in taxable income and not otherwise included in earnings and profits; section 857(d)(1) applies without subparagraph (B). (e)(2) The Secretary* may provide a remedy instead of disqualifying a distribution when a subsection (c) failure is inadvertent or reasonably caused without willful neglect, or is a failure type the Secretary identified as covered by that rule.
For purposes of this part, the term “dividend” shall, except as otherwise provided in this section, include only dividends described in section 316 (relating to definition of dividends for purposes of corporate distributions).
Except in the case of a personal holding company described in section 542—
in the case of amounts distributed in liquidation, the part of such distribution which is properly chargeable to earnings and profits accumulated after February 28, 1913, shall be treated as a dividend for purposes of computing the dividends paid deduction, and
in the case of a complete liquidation occurring within 24 months after the adoption of a plan of liquidation, any distribution within such period pursuant to such plan shall, to the extent of the earnings and profits (computed without regard to capital losses) of the corporation* for the taxable year* in which such distribution is made, be treated as a dividend for purposes of computing the dividends paid deduction.
For purposes of subparagraph (A), a liquidation includes a redemption of stock* to which section 302 applies. Except to the extent provided in regulations, the preceding sentence shall not apply in the case of any mere holding or investment company which is not a regulated investment company.
In the case of a complete liquidation of a personal holding company, occurring within 24 months after the adoption of a plan of liquidation, the amount of any distribution within such period pursuant to such plan shall be treated as a dividend for purposes of computing the dividends paid deduction, to the extent that such amount is distributed to corporate distributees and represents such corporate distributees’ allocable share of the undistributed personal holding company income for the taxable year of such distribution computed without regard to this paragraph and without regard to subparagraph (B) of section 316(b)(2).
Except in the case of a publicly offered regulated investment company (as defined in section 67(c)(2)(B)) or a publicly offered REIT, the amount of any distribution shall not be considered as a dividend for purposes of computing the dividends paid deduction, unless such distribution is pro rata, with no preference to any share of stock as compared with other shares* of the same class, and with no preference to one class of stock as compared with another class except to the extent that the former is entitled (without reference to waivers of their rights by shareholders*) to such preference. In the case of a distribution by a regulated investment company (other than a publicly offered regulated investment company (as so defined)) to a shareholder* who made an initial investment of at least $10,000,000 in such company, such distribution shall not be treated as not being pro rata or as being preferential solely by reason of an increase in the distribution by reason of reductions in administrative expenses of the company.
For purposes of this subsection, the term “publicly offered REIT” means a real estate investment trust* which is required to file annual and periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934.
In the case where a corporation which is a member of an affiliated group of corporations filing or required to file a consolidated return for a taxable year is required to file a separate personal holding company schedule for such taxable year, a distribution by such corporation to another member of the affiliated group shall be considered as a dividend for purposes of computing the dividends paid deduction if such distribution would constitute a dividend under the other provisions of this section to a recipient which is not a member of an affiliated group.
In the case of a real estate investment trust, in determining the amount of dividends under section 316 for purposes of computing the dividends paid deduction—
the earnings and profits of such trust for any taxable year (but not its accumulated earnings) shall be increased by the amount of gain (if any) on the sale or exchange of real property* which is taken into account in determining the taxable income of such trust for such taxable year (and not otherwise taken into account in determining such earnings and profits), and
section 857(d)(1) shall be applied without regard to subparagraph (B) thereof.
In the case of a failure of a distribution by a real estate investment trust to comply with the requirements of subsection (c), the Secretary* may provide an appropriate remedy to cure such failure in lieu of not considering the distribution to be a dividend for purposes of computing the dividends paid deduction if—
the Secretary determines that such failure is inadvertent or is due to reasonable cause and not due to willful neglect, or
such failure is of a type of failure which the Secretary has identified for purposes of this paragraph as being described in subparagraph (A).
Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 198; Pub. L. 88–272, title II, § 225(f)(3), Feb. 26, 1964, 78 Stat. 88; Pub. L. 97–248, title II, § 222(e)(7), Sept. 3, 1982, 96 Stat. 480; Pub. L. 97–448, title I, § 102(c)(2), Jan. 12, 1983, 96 Stat. 2370; Pub. L. 99–514, title VI, § 657(a), title XVIII, § 1804(d)(1), Oct. 22, 1986, 100 Stat. 2299, 2800; Pub. L. 108–357, title IV, § 413(c)(9), Oct. 22, 2004, 118 Stat. 1507; Pub. L. 111–325, title III, § 307(a), (b), Dec. 22, 2010, 124 Stat. 3550; Pub. L. 114–113, div. Q, title III, §§ 314(a), (b), 315(a), 320(b), Dec. 18, 2015, 129 Stat. 3093, 3097.)
- 1954Enacted · Act of Aug. 16, 1954, ch. 736
- 1964Amended · Pub. L. 88-272 · 78 Stat. 88
- 1982Amended · Pub. L. 97-248 · 96 Stat. 480
- 1983Amended · Pub. L. 97-448 · 96 Stat. 2370
- 1986Amended · Pub. L. 99-514 · 100 Stat. 2299, 2800
- 2004Amended · Pub. L. 108-357 · 118 Stat. 1507
- 2010Amended · Pub. L. 111-325 · 124 Stat. 3550
- 2015Amended · Pub. L. 114-113 · 129 Stat. 3093, 3097
A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.
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