Collapse to view only § 860. Deduction for deficiency dividends
§ 860. Deduction for deficiency dividends
(a) General rule
(b) Qualified investment entity definedFor purposes of this section, the term “qualified investment entity” means—
(1) a regulated investment company, and
(2) a real estate investment trust.
(c) Rules for application of section
(1) Interest and additions to tax determined with respect to the amount of deficiency dividend deduction allowedFor purposes of determining interest, additions to tax, and additional amounts—
(A) the tax imposed by this chapter (after taking into account the deduction allowed by subsection (a)) on the qualified investment entity for the taxable year with respect to which the determination is made shall be deemed to be increased by an amount equal to the deduction allowed by subsection (a) with respect to such taxable year,
(B) the last date prescribed for payment of such increase in tax shall be deemed to have been the last date prescribed for the payment of tax (determined in the manner provided by section 6601(b)) for the taxable year with respect to which the determination is made, and
(C) such increase in tax shall be deemed to be paid as of the date the claim for the deficiency dividend deduction is filed.
(2) Credit or refund
(d) AdjustmentFor purposes of this section—
(1) Adjustment in the case of regulated investment companyIn the case of any regulated investment company, the term “adjustment” means—
(A) any increase in the investment company taxable income of the regulated investment company (determined without regard to the deduction for dividends paid (as defined in section 561)),
(B) any increase in the amount of the excess described in section 852(b)(3)(A) (relating to the excess of the net capital gain over the deduction for capital gain dividends paid), and
(C) any decrease in the deduction for dividends paid (as defined in section 561) determined without regard to capital gains dividends.
(2) Adjustment in the case of real estate investment trustIn the case of any real estate investment trust, the term “adjustment” means—
(A) any increase in the sum of—
(i) the real estate investment trust taxable income of the real estate investment trust (determined without regard to the deduction for dividends paid (as defined in section 561) and by excluding any net capital gain), and
(ii) the excess of the net income from foreclosure property (as defined in section 857(b)(4)(B)) over the tax on such income imposed by section 857(b)(4)(A),
(B) any increase in the amount of the excess described in section 857(b)(3)(A)(ii) 1
1 See References in Text note below.
(relating to the excess of the net capital gain over the deduction for capital gains dividends paid), and(C) any decrease in the deduction for dividends paid (as defined in section 561) determined without regard to capital gains dividends.
(e) DeterminationFor purposes of this section, the term “determination” means—
(1) a decision by the Tax Court, or a judgment, decree, or other order by any court of competent jurisdiction, which has become final;
(2) a closing agreement made under section 7121;
(3) under regulations prescribed by the Secretary, an agreement signed by the Secretary and by, or on behalf of, the qualified investment entity relating to the liability of such entity for tax; or
(4) a statement by the taxpayer attached to its amendment or supplement to a return of tax for the relevant tax year.
(f) Deficiency dividends
(1) Definition
(2) Limitations
(A) Ordinary dividendsThe amount of deficiency dividends (other than deficiency dividends qualifying as capital gain dividends) paid by a qualified investment entity for the taxable year with respect to which the liability for tax resulting from the determination exists shall not exceed the sum of—
(i) the excess of the amount of increase referred to in subparagraph (A) of paragraph (1) or (2) of subsection (d) (whichever applies) over the amount of any increase in the deduction for dividends paid (computed without regard to capital gain dividends) for such taxable year which results from such determination, and
(ii) the amount of decrease referred to in subparagraph (C) of paragraph (1) or (2) of subsection (d) (whichever applies).
(B) Capital gain dividends
(3) Effect on dividends paid deduction
(A) For taxable year in which paid
(B) For prior taxable year
(g) Claim required
(h) Suspension of statute of limitations and stay of collection
(1) Suspension of running of statute
(2) Stay of collectionIn the case of any deficiency established by a determination under this section—
(A) the collection of the deficiency, and all interest, additions to tax, additional amounts, and assessable penalties in respect thereof, shall, except in cases of jeopardy, be stayed until the expiration of 120 days after the date of the determination, and
(B) if claim for a deficiency dividend deduction is filed under subsection (g), the collection of such part of the deficiency as is not reduced by the deduction for deficiency dividends provided in subsection (a) shall be stayed until the date the claim is disallowed (in whole or in part), and if disallowed in part collection shall be made only with respect to the part disallowed.
No distraint or proceeding in court shall be begun for the collection of an amount the collection of which is stayed under subparagraph (A) or (B) during the period for which the collection of such amount is stayed.
(i) Deduction denied in case of fraud
(Added Pub. L. 95–600, title III, § 362(a), Nov. 6, 1978, 92 Stat. 2848; amended Pub. L. 96–222, title I, § 103(a)(11)(B), (C), Apr. 1, 1980, 94 Stat. 213; Pub. L. 99–514, title VI, § 667(b)(1), Oct. 22, 1986, 100 Stat. 2306; Pub. L. 108–357, title II, § 243(f)(5), Oct. 22, 2004, 118 Stat. 1445; Pub. L. 111–325, title III, § 301(a)(2), title V, § 501(b), Dec. 22, 2010, 124 Stat. 3542, 3554; Pub. L. 115–141, div. U, title IV, § 401(a)(149), (150), Mar. 23, 2018, 132 Stat. 1191.)