26 U.S.C. § 316 — Dividend defined

(a) General rule. A "dividend" is any distribution of property a corporation makes to its shareholders, taken either (1) out of earnings and profits built up after February 28, 1913, or (2) out of the earnings and profits earned during the same tax year — measured as of the end of that year, without subtracting distributions already made during the year — no matter how much was actually on hand when the distribution happened. Unless this subtitle says otherwise, every distribution counts as coming out of earnings and profits, up to the amount available, taken from the most recently earned profits first. If any distribution is treated under this subchapter as a distribution of property under section 301, it also counts as a distribution of property for this subsection. (b) Special rules. (1) Insurance company dividends. The definition in (a) does not apply to "dividend" as that word is used in subchapter L when it means dividends insurance companies pay to their policyholders. (2) Personal holding company distributions. (A) If a corporation was a "personal holding company" (as section 542 defines it) either under the law that applied for the year the distribution was made, or under the law that applied for a year covered by a late dividend paid under section 563(b) or a deficiency dividend under section 547, then "dividend" also includes any property distribution — dividend or not under (a) — up to the amount of that year's undistributed personal holding company income (figured under section 545, ignoring distributions made under this paragraph). (B) "Distribution of property" here also covers a distribution made during a complete liquidation, if it happens within 24 months of adopting the liquidation plan — but only counting amounts paid to non-corporate shareholders, only to the extent the corporation formally labels the amount a dividend distribution and properly notifies those shareholders (under Treasury regulations), and never more than each shareholder's fair share of that year's undistributed personal holding company income, figured without regard to this subparagraph or section 562(b). (3) Deficiency dividends from a regulated investment company or REIT. "Dividend" also includes any property distribution — again, whether or not it is a dividend under (a) — that counts as a "deficiency dividend" under section 860(f). (4) Regulated investment companies distributing more than their earnings. If a regulated investment company's tax year is not the calendar year, and its distributions on a class of stock for the year exceed its current and accumulated earnings and profits available for that class's dividends, the company's current earnings and profits go first to distributions made on that class before January 1 of that year.