I.R.C. § 860(a) General Rule —
If a determination with respect to any qualified investment
entity results in any adjustment for any taxable year, a deduction
shall be allowed to such entity for the amount of deficiency dividends
for purposes of determining the deduction for dividends paid (for
purposes of section 852 or 857, whichever applies) for such
year.
I.R.C. § 860(b) Qualified Investment Entity Defined —
For purposes of this section, the term “qualified investment
entity” means—
I.R.C. § 860(b)(1) —
a regulated investment company,
and
I.R.C. § 860(b)(2) —
a real estate investment trust.
I.R.C. § 860(c) Rules For Application Of Section
I.R.C. § 860(c)(1) Interest And Additions To Tax Determined With Respect To The
Amount Of Deficiency Dividend Deduction Allowed —
For purposes of determining interest, additions to
tax, and additional amounts—
I.R.C. § 860(c)(1)(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,
I.R.C. § 860(c)(1)(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
I.R.C. § 860(c)(1)(C) —
such increase in tax shall be deemed
to be paid as of the date the claim for the deficiency dividend deduction
is filed.
I.R.C. § 860(c)(2) Credit Or Refund —
If the allowance of a deficiency dividend deduction
results in an overpayment of tax for any taxable year, credit or
refund with respect to such overpayment shall be made as if on the
date of the determination 2 years remained before the expiration
of the period of limitations on the filing of claim for refund for
the taxable year to which the overpayment relates.
I.R.C. § 860(d) Adjustment —
For purposes of this section—
I.R.C. § 860(d)(1) Adjustment In The Case Of Regulated Investment Company —
In the case of any regulated investment company, the
term “adjustment” means—
I.R.C. § 860(d)(1)(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)),
I.R.C. § 860(d)(1)(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
I.R.C. § 860(d)(1)(C) —
any decrease in the deduction for
dividends paid (as defined in section 561)
determined without regard to capital gains dividends.
I.R.C. § 860(d)(2) Adjustment In The Case Of Real Estate Investment Trust —
In the case of any real estate investment trust, the
term “adjustment” means—
I.R.C. § 860(d)(2)(A) —
any increase in the sum of—
I.R.C. § 860(d)(2)(A)(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
I.R.C. § 860(d)(2)(A)(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),
I.R.C. § 860(d)(2)(B) —
any increase in the amount of the
excess described in section 857(b)(3)(A)(ii) (relating
to the excess of the net capital gain over the deduction for capital
gains dividends paid), and
I.R.C. § 860(d)(2)(C) —
any decrease in the deduction for
dividends paid (as defined in section 561)
determined without regard to capital gains dividends.
I.R.C. § 860(e) Determination —
For purposes of this section, the term “determination"
means—
I.R.C. § 860(e)(1) —
a decision by the Tax Court, or
a judgment, decree, or other order by any court of competent jurisdiction,
which has become final;
I.R.C. § 860(e)(2) —
a closing agreement made under section 7121;
I.R.C. § 860(e)(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
I.R.C. § 860(e)(4) —
a statement by the taxpayer attached
to its amendment or supplement to a return of tax for the relevant
tax year.
I.R.C. § 860(f) Deficiency Dividends
I.R.C. § 860(f)(1) Definition —
For purposes of this section, the term “deficiency
dividends” means a distribution of property made by the qualified
investment entity on or after the date of the determination and before
filing claim under subsection (g), which would have been includible
in the computation of the deduction for dividends paid under section 561 for the taxable year with
respect to which the liability for tax resulting from the determination
exists if distributed during such taxable year. No distribution of
property shall be considered as deficiency dividends for purposes
of subsection (a) unless distributed within 90 days after the determination,
and unless a claim for a deficiency dividend deduction with respect
to such distribution is filed pursuant to subsection (g).
I.R.C. § 860(f)(2) Limitations
I.R.C. § 860(f)(2)(A) Ordinary Dividends —
The 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.R.C. § 860(f)(2)(A)(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
I.R.C. § 860(f)(2)(A)(ii) —
the amount of decrease referred
to in subparagraph (C) of paragraph (1) or (2) of subsection (d)
(whichever applies).
I.R.C. § 860(f)(2)(B) Capital Gain Dividends —
The amount of 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 amount by which (i) the
increase referred to in subparagraph (B) of paragraph (1) or (2)
of subsection (d) (whichever applies), exceeds (ii) the amount of
any dividends paid during such taxable year which are designated
or reported (as the case may be) as capital gain dividends after such
determination.
I.R.C. § 860(f)(3) Effect On Dividends Paid Deduction
I.R.C. § 860(f)(3)(A) For Taxable Year In Which Paid —
Deficiency dividends paid in any taxable year shall
not be included in the amount of dividends paid for such year for
purposes of computing the dividends paid deduction for such year.
I.R.C. § 860(f)(3)(B) For Prior Taxable Year —
Deficiency dividends paid in any taxable year shall
not be allowed for purposes of section 855(a) or 858(a) in the computation of
the dividends paid deduction for the taxable year preceding the taxable
year in which paid.
I.R.C. § 860(g) Claim Required —
No deficiency dividend deduction shall be allowed under
subsection (a) unless (under regulations prescribed by the Secretary)
claim therefore is filed within 120 days after the date of the determination.
I.R.C. § 860(h) Suspension Of Statute Of Limitations And Stay Of Collection
I.R.C. § 860(h)(1) Suspension Of Running Of Statute —
If the qualified investment entity files a claim as
provided in subsection (g), the running of the statute of limitations
provided in section 6501 on
the making of assessments, and the bringing of distraint or a proceeding
in court for collection, in respect of the deficiency established
by a determination under this section, and all interest, additions
to tax, additional amounts, or assessable penalties in respect thereof,
shall be suspended for a period of 2 years after the date of the
determination.
I.R.C. § 860(h)(2) Stay Of Collection —
In the case of any deficiency established by a determination
under this section—
I.R.C. § 860(h)(2)(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
I.R.C. § 860(h)(2)(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.R.C. § 860(i) Deduction Denied In Case Of Fraud —
No deficiency dividend deduction shall be allowed under
subsection (a) if the determination contains a finding that any part
of any deficiency attributable to an adjustment with respect to the
taxable year is due to fraud with intent to evade tax or to willful
failure to file an income tax return within the time prescribed
by law or prescribed by the Secretary in pursuance of law.
(Added Pub. L. 95-600,
title III, 362(a), Nov. 6, 1978, 92 Stat.
2848, and 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, Ssec. 243(f)(5), Oct. 22, 2004, 118
Stat. 1418; Pub. L.
111-325, Sec. 301(a)(2), 501(b), Dec. 22, 2010, 124 Stat. 3537; Pub.
L. 115-141, Div. U, title IV, Sec. 401(a)(149)-(150), Mar.
23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018--Subsec.(f)(2)(A)(ii). Pub. L. 115-141, Div. U, Sec. 401(a)(149),
amended clause (ii) by substituting “decrease” for “decreased”.
Subsec.(i). Pub. L. 115-141,
Div. U, Sec. 401(a)(150), amended subsec. (i) by substituting “willful”
for “willfull”.
2010--Subsec. (f)(2)(B). Pub. L. 111-325, Sec. 301(a)(2),
amended subpar. (B) by inserting “or reported (as the case may
be)” after “designated”.
Subsec. (j). Pub.
L. 111-325, Sec. 501(b), struck subsec. (j). Before being
struck, it read as follows:
“(j) Penalty.—For assessable penalty
with respect to liability for tax of a regulated investment company
which is allowed a deduction under subsection (a), see section 6697.”
2004--Subsec. (e). Pub.
L. 108-357, Sec. 243(f)(5), amended subsec. (e) by striking
“or” at the end of par. (2); by substituting “; or” for the period
at the end of par. (3); and by adding par. (4).
1986--Subsec. (j). Pub. L. 99-514 substituted “regulated investment
company” for “qualified investment entity”.
1980--Subsec. (f). Pub. L. 96-222 substituted in heading “Deficiency"
for “Efficiency” and in par. (2)(A)(i) “(computed without regard"
for “computed without regard”.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendments by Pub. L.
115-141, Div. U, Sec. 401(a)(149)-(150), effective March
23, 2018.
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendment by Pub.
L. 111-325, Sec. 301(a)(2), effective for taxable years
beginning after the date of the enactment of this Act [Enacted: Dec.
22, 2010].
Amendment
by Pub. L. 111-325, Sec. 501(b),
effective for taxable years beginning after the date of the enactment
of this Act [Enacted: Dec. 22, 2010].
EFFECTIVE
DATE OF 2004 AMENDMENTS
Amendments
by Pub. L. 108-357, Sec. 243(f)(5),
effective for taxable years beginning after the date of the enactment
of this Act [Enacted: Oct. 22, 2004].
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by Pub. L. 99-514 applicable
to taxable years beginning after Dec. 31, 1986, see section 669 of Pub. L. 99-514, set out as a note under
section 856 of this title.
EFFECTIVE DATE
Section 362(e) of Pub.
L. 95-600, as amended by Pub. L.
96-222, title I, 103(a)(11)(A), Apr. 1, 1980, 94 Stat. 212; Pub.
L. 99-514, 2, Oct. 22, 1986, 100
Stat. 2095, provided that: “The amendments made by this
section [enacting this section, amending sections 316, 381, 852, 857,
6422, 6503, 6515, and 6697 of this title, repealing section 859 of
this title, and redesignating prior section 860 as 859 of this title]
shall apply with respect to determinations (as defined in section 860(e) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954])
after the date of the enactment of this Act [Nov. 6, 1978].”
PRIOR
PROVISIONS
A
prior section 860, added Pub. L. 94-455,
title XVI, 1604(i)(1), Oct. 4, 1976, 90
Stat. 1752, was redesignated section 859 by section 362(d)(6)
of Pub. L. 95-600.
