26 U.S.C. § 854 — Limitations applicable to dividends received from regulated investment company
submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 704 words · no verdicts yet
This section limits how shareholders and corporations may treat dividends received from a regulated investment company. It sets reporting limits for deductions and qualified dividend income.
(a) Capital-gain dividend. For the rules on the maximum dividend tax rate and corporate deductions for dividends received, a capital-gain dividend received from a regulated investment company is not treated as a dividend. The term “capital gain dividend” is defined by section 852(b)(3), not by this section.
(b) Other dividends. (1)(A) For a dividend not covered by subsection (a), if the investment company meets section 852(a) for the year it paid the dividend, only the part the company reports in written shareholder* statements as eligible for the section 243 deduction is counted for that deduction. That dividend is treated as coming from a corporation* that is not a 20-percent-owned corporation. (B) If the company also has qualified dividend income below 95 percent of gross income, only the part it reports as qualified dividend income is counted in computing qualified dividend income. For this test, gross income from stock* or securities sales means net short-term capital gain minus net long-term capital loss. (C) The amount reported as dividends cannot exceed the company's aggregate dividends received. The amount reported as qualified dividend income cannot exceed the company's qualified dividend income plus earnings and profits distributed in the year that accumulated during a year when this part did not apply.
(2) Only dividends from domestic corporations count in aggregate dividends received. “Dividend” does not include a distribution from a tax-exempt organization described in section 501 or 521, or from a real estate investment trust* that qualifies under part II of subchapter M for the year of payment. Dividends received from regulated investment companies remain subject to this section's limits.
(3) For the section 243 rule, an amount counts as a dividend only if the investment company could have claimed a section 243 deduction, treating section 243 as applying to it, after applying section 246 (without subsection (b)) and section 246A. (4) “Qualified dividend income” has the meaning given by section 1(h)(11)(B).
For purposes of section 1(h)(11) (relating to maximum rate of tax on dividends) and section 243 (relating to deductions for dividends received by corporations), a capital gain dividend (as defined in section 852(b)(3)) received from a regulated investment company shall not be considered as a dividend.
In any case in which—
a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies), and
such investment company meets the requirements of section 852(a) for the taxable year* during which it paid such dividend,
then, in computing any deduction under section 243, there shall be taken into account only that portion of such dividend reported by the regulated investment company as eligible for such deduction in written statements furnished to its shareholders* and such dividend shall be treated as received from a corporation* which is not a 20-percent owned corporation.
In any case in which—
a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies),
such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend, and
the qualified dividend income of such investment company for such taxable year is less than 95 percent of its gross income,
then, in computing qualified dividend income, there shall be taken into account only that portion of such dividend reported by the regulated investment company as qualified dividend income in written statements furnished to its shareholders.
For purposes of clause (i), in the case of 1 or more sales or other dispositions of stock* or securities, the term “gross income” includes only the excess of—
the net short-term capital gain from such sales or dispositions, over
the net long-term capital loss from such sales or dispositions.
The aggregate amount which may be reported as dividends under subparagraph (A) shall not exceed the aggregate dividends received by the company for the taxable year.
The aggregate amount which may be reported as qualified dividend income under subparagraph (B) shall not exceed the sum of—
the qualified dividend income of the company for the taxable year, and
the amount of any earnings and profits which were distributed by the company for such taxable year and accumulated in a taxable year with respect to which this part did not apply.
For purposes of this subsection—
In computing the amount of aggregate dividends received, there shall only be taken into account dividends received from domestic corporations.
For purposes of subparagraph (A), the term “dividend” shall not include any distribution from—
a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers’ cooperative associations), or
a real estate investment trust* which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following).
In determining the amount of any dividend for purposes of this paragraph, a dividend received from a regulated investment company shall be subject to the limitations prescribed in this section.
For purposes of subparagraph (A) of paragraph (1), an amount shall be treated as a dividend for the purpose of paragraph (1) only if a deduction would have been allowable under section 243 to the regulated investment company determined—
as if section 243 applied to dividends received by a regulated investment company,
after the application of section 246 (but without regard to subsection (b) thereof), and
after the application of section 246A.
For purposes of this subsection, the term “qualified dividend income” has the meaning given such term by section 1(h)(11)(B).
Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 273; Pub. L. 88–272, title II, §§ 201(d)(8)–(10), 229(a)(4), Feb. 26, 1964, 78 Stat. 32, 99; Pub. L. 96–223, title IV, § 404(b)(6), Apr. 2, 1980, 94 Stat. 307; Pub. L. 97–34, title III, § 302(c)(4), (d)(1), Aug. 13, 1981, 95 Stat. 272, 274; Pub. L. 98–369, div. A, title I, §§ 16(a), 52(a)–(c), July 18, 1984, 98 Stat. 505, 564, 565; Pub. L. 99–514, title VI, §§ 612(b)(6), 655(a)(4), Oct. 22, 1986, 100 Stat. 2250, 2299; Pub. L. 100–203, title X, § 10221(d)(3), Dec. 22, 1987, 101 Stat. 1330–409; Pub. L. 100–647, title I, § 1006(b)(2), Nov. 10, 1988, 102 Stat. 3393; Pub. L. 108–27, title III, § 302(c), May 28, 2003, 117 Stat. 762; Pub. L. 108–311, title IV, § 402(a)(5)(A)–(D), Oct. 4, 2004, 118 Stat. 1184; Pub. L. 111–325, title III, § 301(e), Dec. 22, 2010, 124 Stat. 3544.)
- 1954Enacted · Act of Aug. 16, 1954, ch. 736
- 1964Amended · Pub. L. 88-272 · 78 Stat. 32, 99
- 1980Amended · Pub. L. 96-223 · 94 Stat. 307
- 1981Amended · Pub. L. 97-34 · 95 Stat. 272, 274
- 1984Amended · Pub. L. 98-369 · 98 Stat. 505, 564, 565
- 1986Amended · Pub. L. 99-514 · 100 Stat. 2250, 2299
- 1987Amended · Pub. L. 100-203 · 101 Stat. 1330
- 1988Amended · Pub. L. 100-647 · 102 Stat. 3393
- 2003Amended · Pub. L. 108-27 · 117 Stat. 762
- 2004Amended · Pub. L. 108-311 · 118 Stat. 1184
- 2010Amended · Pub. L. 111-325 · 124 Stat. 3544
A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.
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