- § 561. Definition of deduction for dividends paid
- § 562. Rules applicable in determining dividends eligible for dividends paid deduction
- § 563. Rules relating to dividends paid after close of taxable year
- § 564. Dividend carryover
- § 565. Consent dividends
§ 561. Definition of deduction for dividends paid
(a) General rule
The deduction for dividends paid shall be the sum of—
(1) the dividends paid during the taxable year,
(2) the consent dividends for the taxable year (determined under section 565), and
(3) in the case of a personal holding company, the dividend carryover described in section 564.
(b) Special rules applicable
(Aug. 16, 1954, ch. 736, 68A Stat. 198; Pub. L. 87–403, § 3(f), Feb. 2, 1962, 76 Stat. 8; Pub. L. 94–455, title XIX, § 1901(b)(32)(H), Oct. 4, 1976, 90 Stat. 1800.)
§ 562. Rules applicable in determining dividends eligible for dividends paid deduction
(a) General rule
(b) Distributions in liquidation
(1) Except in the case of a personal holding company described in section 542—
(A) 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
(B) 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.
(2) 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).
(c) Preferential dividends
(1) In general
(2) Publicly offered REIT
(d) Distributions by a member of an affiliated group
(e) Special rules for real estate investment trusts
(1) Determination of earnings and profits for purposes of dividends paid deductionIn 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—
(A) 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
(B) section 857(d)(1) shall be applied without regard to subparagraph (B) thereof.
(2) Authority to provide alternative remedies for certain failuresIn 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—
(A) the Secretary determines that such failure is inadvertent or is due to reasonable cause and not due to willful neglect, or
(B) such failure is of a type of failure which the Secretary has identified for purposes of this paragraph as being described in subparagraph (A).
(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.)
§ 563. Rules relating to dividends paid after close of taxable year
(a) Accumulated earnings tax
(b) Personal holding company tax
In the determination of the dividends paid deduction for purposes of the personal holding company tax imposed by section 541, a dividend paid after the close of any taxable year and on or before the 15th day of the fourth month following the close of such taxable year shall, to the extent the taxpayer elects in its return for the taxable year, be considered as paid during such taxable year. The amount allowed as a dividend by reason of the application of this subsection with respect to any taxable year shall not exceed either—
(1) The undistributed personal holding company income of the corporation for the taxable year, computed without regard to this subsection, or
(2) 20 percent of the sum of the dividends paid during the taxable year, computed without regard to this subsection.
(c) Dividends considered as paid on last day of taxable year
(Aug. 16, 1954, ch. 736, 68A Stat. 199; Pub. L. 91–172, title IX, § 914(a), Dec. 30, 1969, 83 Stat. 723; Pub. L. 101–239, title VII, § 7401(b), Dec. 19, 1989, 103 Stat. 2356; Pub. L. 108–357, title IV, § 413(c)(10), Oct. 22, 2004, 118 Stat. 1507; Pub. L. 114–41, title II, § 2006(a)(2)(B), July 31, 2015, 129 Stat. 457.)
§ 564. Dividend carryover
(a) General rule
(b) Computation of dividend carryover
The dividend carryover to the taxable year shall be determined as follows:
(1) For each of the 2 preceding taxable years there shall be determined the taxable income computed with the adjustments provided in section 545 (whether or not the taxpayer was a personal holding company for either of such preceding taxable years), and there shall also be determined for each such year the deduction for dividends paid during such year as provided in section 561 (but determined without regard to the dividend carryover to such year).
(2) There shall be determined for each such taxable year whether there is an excess of such taxable income over such deduction for dividends paid or an excess of such deduction for dividends paid over such taxable income, and the amount of each such excess.
(3) If there is an excess of such deductions for dividends paid over such taxable income for the first preceding taxable year, such excess shall be allowed as a dividend carryover to the taxable year.
(4) If there is an excess of such deduction for dividends paid over such taxable income for the second preceding taxable year, such excess shall be reduced by the amount determined in paragraph (5), and the remainder of such excess shall be allowed as a dividend carryover to the taxable year.
(5) The amount of the reduction specified in paragraph (4) shall be the amount of the excess of the taxable income, if any, for the first preceding taxable year over such deduction for dividends paid, if any, for the first preceding taxable year.
(Aug. 16, 1954, ch. 736, 68A Stat. 200; Pub. L. 94–455, title XIX, § 1901(a)(81), Oct. 4, 1976, 90 Stat. 1778.)
§ 565. Consent dividends
(a) General rule
(b) Limitations
A consent dividend shall not include—
(1) an amount specified in a consent which, if distributed in money, would constitute, or be part of, a distribution which would be disqualified for purposes of the dividends paid deduction under section 562(c) (relating to preferential dividends), or
(2) an amount specified in a consent which would not constitute a dividend (as defined in section 316) if the total amounts specified in consents filed by the corporation had been distributed in money to shareholders on the last day of the taxable year of such corporation.
(c) Effect of consent
The amount of a consent dividend shall be considered, for purposes of this title—
(1) as distributed in money by the corporation to the shareholder on the last day of the taxable year of the corporation, and
(2) as contributed to the capital of the corporation by the shareholder on such day.
(d) Consent dividends and other distributions
(e) Nonresident aliens and foreign corporations
(f) Definitions
(1) Consent stock
(2) Preferred dividends
(Aug. 16, 1954, ch. 736, 68A Stat. 200; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)