26 U.S.C. § 246: Rules applying to deductions for dividends received

The deductions allowed by sections 243 1 245, and 245A shall not apply to any dividend from a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers’ cooperative associations). 1 So in original. Probably should be followed by a comma. the dividends received by the FHLB from the FHLMC during such taxable year, bears to the total earnings and profits of the FHLB for such taxable year. for taxable years ending after December 31, 1984 , and which were not previously treated as distributed under subparagraph (A) or this subparagraph, bears to the total accumulated earnings and profits of the FHLB as of the time such dividend is paid. To the extent that paragraph (1) does not apply to any dividend by reason of subparagraph (A) or (B) of this paragraph, the requirement contained in section 243(a) that the corporation paying the dividend be subject to taxation under this chapter shall not apply. The term “FHLB” means any Federal Home Loan Bank. The term “FHLMC” means the Federal Home Loan Mortgage Corporation. The taxable year of an FHLB shall, except as provided in regulations prescribed by the Secretary, be treated as the calendar year. any dividends received by the FHLB from the FHLMC during such taxable year, and the total earnings and profits (determined without regard to dividends described in subclause (I)) of the FHLB as reported in its annual financial statement prepared in accordance with section 20 of the Federal Home Loan Bank Act ( 12 U.S.C. 1440 ). Except as provided in paragraph (2), the aggregate amount of the deductions allowed by section 243(a)(1), subsection 2 (a) and 2 So in original. 2 (b) of section 245, and section 250 shall not exceed the percentage determined under paragraph (3) of the taxable income computed without regard to the deductions allowed by sections 172, 199A, 243(a)(1), subsection 2 (a) and 2 (b) of section 245, and 250, without regard to any adjustment under section 1059, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1). Paragraph (1) shall not apply for any taxable year for which there is a net operating loss (as determined under section 172). first separately with respect to dividends from 20-percent owned corporations (as defined in section 243(c)(2)) and the percentage determined under this paragraph shall be 65 percent, and then separately with respect to dividends not from 20-percent owned corporations and the percentage determined under this paragraph shall be 50 percent and the taxable income shall be reduced by the aggregate amount of dividends from 20-percent owned corporations (as so defined). which is held by the taxpayer for 45 days or less during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend, or to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. by substituting “90 days” for “45 days” each place it appears, and by substituting “181-day period” for “91-day period”. the day of disposition, but not the day of acquisition, shall be taken into account, and paragraph (3) of section 1223 shall not apply. the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially identical stock or securities, the taxpayer is the grantor of an option to buy substantially identical stock or securities, or under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property. by substituting “365 days” for “45 days” each place it appears, and by substituting “731-day period” for “91-day period”, and paragraph (2) shall not apply. the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10-percent owned foreign corporation at all times during such period, and the taxpayer is a United States shareholder with respect to such specified 10-percent owned foreign corporation at all times during such period. No deduction shall be allowed under section 243 in respect of a dividend from a corporation which is a DISC or former DISC (as defined in section 992(a)) to the extent such dividend is paid out of the corporation’s accumulated DISC income or previously taxed income, or is a deemed distribution pursuant to section 995(b)(1). The amendments made by this section [amending this section] shall apply to dividends received or accrued after the 30th day after the date of the enactment of this Act [ Aug. 5, 1997 ]. the dividend is paid with respect to stock held by the taxpayer on June 8, 1997 , and all times thereafter until the dividend is received, such stock is continuously subject to a position described in section 246(c)(4) of the Internal Revenue Code of 1986 on June 8, 1997 , and all times thereafter until the dividend is received, and such stock and position are clearly identified in the taxpayer’s records within 30 days after the date of the enactment of this Act. The amendments made by subsection (a) [amending this section and sections 243, 244, 246A, and 805 of this title] shall apply to dividends received or accrued after December 31, 1986 , in taxable years ending after such date. The amendment made by subsection (a) to section 246(b) of the Internal Revenue Code of 1986 shall apply to taxable years beginning after December 31, 1986 .” Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 367, 934, and [former] 936 of this title] shall apply to taxable years beginning after December 31, 1982 . Paragraph (6) of [former] section 936(h) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and so much of section 934 to which such paragraph applies by reason of section 934(e)(4) of such Code, shall apply to taxable years ending after July 1, 1982 . Subsection (d) [amending section 367 of this title ] shall apply to taxable years ending after August 14, 1982 .”