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 —
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.
