General rule
Section not to apply to dividends for which 100 percent dividends received deduction allowable
Debt financed portfolio stock
In general
The term “debt financed portfolio stock” means any portfolio stock if at some time during the base period there is portfolio indebtedness with respect to such stock.
Portfolio stock
Special rule for stock in a bank or bank holding company
In general
If, as of the beginning of the ex-dividend date, the taxpayer owns stock of any bank or bank holding company having a value equal to at least 80 percent of the total value of the stock of such bank or bank holding company, for purposes of paragraph (2)(A)(i), the taxpayer shall be treated as owning any stock of such bank or bank holding company which the taxpayer has an option to acquire.
Definitions
Bank
The term “bank” has the meaning given such term by section 581.
Bank holding company
The term “bank holding company” means a bank holding company (within the meaning of section 2(a) of the Bank Holding Company Act of 1956).
Treatment of certain preferred stock
For purposes of determining whether the requirements of subparagraph (A) or (B) of paragraph (2) or of subparagraph (A) of paragraph (3) are met, stock described in section 1504(a)(4) shall not be taken into account.
Average indebtedness percentage
In general
Special rule where stock not held throughout base period
In the case of any stock which was not held by the taxpayer throughout the base period, paragraph (1) shall be applied as if the base period consisted only of that portion of the base period during which the stock was held by the taxpayer.
Portfolio indebtedness
In general
The term “portfolio indebtedness” means any indebtedness directly attributable to investment in the portfolio stock.
Certain amounts received from short sale treated as indebtedness
For purposes of subparagraph (A), any amount received from a short sale shall be treated as indebtedness for the period beginning on the day on which such amount is received and ending on the day the short sale is closed.
Base period
Reduction in dividends received deduction not to exceed allocable interest
Under regulations prescribed by the Secretary, any reduction under this section in the amount allowable as a deduction under section 243 or 245 with respect to any dividend shall not exceed the amount of any interest deduction (including any deductible short sale expense) allocable to such dividend.
Regulations
The regulations prescribed for purposes of this section under section 7701(f) shall include regulations providing for the disallowance of interest deductions or other appropriate treatment (in lieu of reducing the dividend received deduction) where the obligor of the indebtedness is a person other than the person receiving the dividend.
Pub. L. 98–369, div. A, title I, § 51(a)98 Stat. 562Pub. L. 99–514, title VI, § 611(a)(4)100 Stat. 2249Pub. L. 100–203, title X, § 10221(d)(2)101 Stat. 1330–409Pub. L. 100–647, title I, § 1012l102 Stat. 3513Pub. L. 108–311, title IV, § 408(a)(9)118 Stat. 1191Pub. L. 113–295, div. A, title II, § 221(a)(41)(F)128 Stat. 4044Pub. L. 115–97, title I, § 13002(d)131 Stat. 2100Pub. L. 115–141, div. U, title IV, § 401(b)(17)132 Stat. 1202(Added , , ; amended , title XVIII, § 1804(a), , , 2798; , , ; ()(1), , ; , , ; , , ; , , ; , , .)
Editorial Notes
References in Text
Pub. L. 85–69972 Stat. 689section 661 of Title 15The Small Business Investment Act of 1958, referred to in subsec. (b)(2), is , , , which is classified principally to chapter 14B (§ 661 et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see Short Title note set out under and Tables.
section 1841(a) of Title 12Section 2(a) of the Bank Holding Company Act of 1956, referred to in subsec. (c)(3)(B)(ii), is classified to , Banks and Banking.
Amendments
Pub. L. 115–1412018—Subsec. (b)(1). struck out “without regard to section 243(d)(4)” after “section 243(b)”.
Pub. L. 115–972017—Subsec. (a)(1). substituted “50 percent” for “70 percent” and “65 percent” for “80 percent”.
Pub. L. 113–2952014—Subsecs. (a), (e). struck out “, 244,” after “section 243”.
Pub. L. 108–3112004—Subsec. (b)(1). substituted “section 243(d)(4)” for “section 243(c)(4)”.
Pub. L. 100–6471988—Subsec. (a). struck out at end “The preceding sentence shall be applied before any determination of a ratio under paragraph (1) or (2) of section 245(a).”
Pub. L. 100–2031987—Subsec. (a)(1). substituted “70 percent (80 percent in the case of any dividend from a 20-percent owned corporation as defined in section 243(c)(2))” for “80 percent”.
Pub. L. 99–514, § 1804(a)1986—Subsec. (a). , substituted “or 245(a)” for “or 245” and inserted “The preceding sentence shall be applied before any determination of a ratio under paragraph (1) or (2) of section 245(a).”
Pub. L. 99–514, § 611(a)(4)Subsec. (a)(1). , substituted “80 percent” for “85 percent”.
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Pub. L. 115–97section 13002(f) of Pub. L. 115–97section 243 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .
Effective Date of 2014 Amendment
Pub. L. 113–295section 247 of this titlePub. L. 113–295section 221(a)(41)(K) of Pub. L. 113–295section 172 of this titleAmendment by not applicable to preferred stock issued before (determined in the same manner as under as in effect before its repeal by ), see , set out as a note under .
section 221(a) of Pub. L. 113–295Pub. L. 113–295section 221(b) of Pub. L. 113–295section 1 of this titleExcept as otherwise provided in , amendment by effective , subject to a savings provision, see , set out as a note under .
Effective Date of 1988 Amendment
Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
Effective Date of 1987 Amendment
Pub. L. 100–203section 10221(e)(1) of Pub. L. 100–203section 243 of this titleAmendment by applicable to dividends received or accrued after , in taxable years ending after such date, see , set out as a note under .
Effective Date of 1986 Amendment
section 611(a)(4) of Pub. L. 99–514section 611(b) of Pub. L. 99–514section 246 of this titleAmendment by applicable to dividends received or accrued after , in taxable years ending after such date, see , set out as a note under .
section 1804(a) of Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .
Effective Date
Pub. L. 98–369, div. A, title I, § 51(c)98 Stat. 564
Savings Provision
Pub. L. 115–141section 401(e) of Pub. L. 115–141section 23 of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .
Plan Amendments Not Required Until January 1, 1989
Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .