Collapse to view only § 318. Constructive ownership of stock
§ 316. Dividend defined
(a) General ruleFor purposes of this subtitle, the term “dividend” means any distribution of property made by a corporation to its shareholders—
(1) out of its earnings and profits accumulated after February 28, 1913, or
(2) out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a distribution of property to which section 301 applies, such distribution shall be treated as a distribution of property for purposes of this subsection.
(b) Special rules
(1) Certain insurance company dividends
(2) Distributions by personal holding companies
(A) In the case of a corporation which—
(i) under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or
(ii) for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year,
the term “dividend” also means any distribution of property (whether or not a dividend as defined in subsection (a)) made by the corporation to its shareholders, to the extent of its undistributed personal holding company income (determined under section 545 without regard to distributions under this paragraph) for such year.
(B) For purposes of subparagraph (A), the term “distribution of property” includes a distribution in complete liquidation occurring within 24 months after the adoption of a plan of liquidation, but—
(i) only to the extent of the amounts distributed to distributees other than corporate shareholders, and
(ii) only to the extent that the corporation designates such amounts as a dividend distribution and duly notifies such distributees of such designation, under regulations prescribed by the Secretary, but
(iii) not in excess of the sum of such distributees’ allocable share of the undistributed personal holding company income for such year, computed without regard to this subparagraph or section 562(b).
(3) Deficiency dividend distributions by a regulated investment company or real estate investment trust
(4) Certain distributions by regulated investment companies in excess of earnings and profits
(Aug. 16, 1954, ch. 736, 68A Stat. 98; Mar. 13, 1956, ch. 83, § 5(1), 70 Stat. 49; Pub. L. 88–272, title II, § 225(f)(1), Feb. 26, 1964, 78 Stat. 87; Pub. L. 94–455, title XVI, § 1601(d), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1746, 1834; Pub. L. 95–600, title III, § 362(d)(1), Nov. 6, 1978, 92 Stat. 2851; Pub. L. 111–325, title III, § 305(a), Dec. 22, 2010, 124 Stat. 3549.)
§ 317. Other definitions
(a) Property
(b) Redemption of stock
(Aug. 16, 1954, ch. 736, 68A Stat. 99.)
§ 318. Constructive ownership of stock
(a) General rule
For purposes of those provisions of this subchapter to which the rules contained in this section are expressly made applicable—
(1) Members of family
(A) In general
An individual shall be considered as owning the stock owned, directly or indirectly, by or for—
(i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and
(ii) his children, grandchildren, and parents.
(B) Effect of adoption
(2) Attribution from partnerships, estates, trusts, and corporations
(A) From partnerships and estates
(B) From trusts
(i) Stock owned, directly or indirectly, by or for a trust (other than an employees’ trust described in section 401(a) which is exempt from tax under section 501(a)) shall be considered as owned by its beneficiaries in proportion to the actuarial interest of such beneficiaries in such trust.
(ii) Stock owned, directly or indirectly, by or for any portion of a trust of which a person is considered the owner under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners) shall be considered as owned by such person.
(C) From corporations
(3) Attribution to partnerships, estates, trusts, and corporations
(A) To partnerships and estates
(B) To trusts
(i) Stock owned, directly or indirectly, by or for a beneficiary of a trust (other than an employees’ trust described in section 401(a) which is exempt from tax under section 501(a)) shall be considered as owned by the trust, unless such beneficiary’s interest in the trust is a remote contingent interest. For purposes of this clause, a contingent interest of a beneficiary in a trust shall be considered remote if, under the maximum exercise of discretion by the trustee in favor of such beneficiary, the value of such interest, computed actuarially, is 5 percent or less of the value of the trust property.
(ii) Stock owned, directly or indirectly, by or for a person who is considered the owner of any portion of a trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners) shall be considered as owned by the trust.
(C) To corporations
(4) Options
(5) Operating rules
(A) In general
(B) Members of family
(C) Partnerships, estates, trusts, and corporations
(D) Option rule in lieu of family rule
(E) S corporation treated as partnership
For purposes of this subsection—
(i) an S corporation shall be treated as a partnership, and
(ii) any shareholder of the S corporation shall be treated as a partner of such partnership.
The preceding sentence shall not apply for purposes of determining whether stock in the S corporation is constructively owned by any person.
(span) Cross references
For provisions to which the rules contained in subsection (a) apply, see—
(1) section 302 (relating to redemption of stock);
(2) section 304 (relating to redemption by related corporations);
(3) section 306(span)(1)(A) (relating to disposition of section 306 stock);
(4) section 338(h)(3) (defining purchase);
(5) section 382(l)(3) (relating to special limitations on net operating loss carryovers);
(6) section 856(d) (relating to definition of rents from real property in the case of real estate investment trusts);
(7) section 958(span) (relating to constructive ownership rules with respect to controlled foreign corporations); and
(8) section 6038(e)(2) (relating to information with respect to certain foreign corporations).
(Aug. 16, 1954, ch. 736, 68A Stat. 99; Puspan. L. 86–779, § 10(h), Sept. 14, 1960, 74 Stat. 1009; Puspan. L. 87–834, § 20(d)(1), Oct. 16, 1962, 76 Stat. 1063; Puspan. L. 88–554, § 4(a), (span)(2), Aug. 31, 1964, 78 Stat. 762, 763; Puspan. L. 97–248, title II, § 224(c)(3), Sept. 3, 1982, 96 Stat. 489; Puspan. L. 98–369, div. A, title VII, §§ 712(k)(5)(E), 721(j), July 18, 1984, 98 Stat. 950, 969; Puspan. L. 99–514, title VI, § 621(c)(1), Oct. 22, 1986, 100 Stat. 2266; Puspan. L. 105–34, title XI, § 1142(e)(3), Aug. 5, 1997, 111 Stat. 983; Puspan. L. 109–135, title IV, § 412(u), Dec. 21, 2005, 119 Stat. 2638.)