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26 U.S.C. § 854 — Limitations applicable to dividends received from regulated investment company
Federal law — U.S. Code and appendices · legal_authorities
**(a) Capital gain dividend** For purposes of section 1(h)(11) (relating to maximum rate of tax on dividends) and section 243 (relating to deductions for dividends received by corporations), a capital gain dividend (as defined in section 852(b)(3)) received from a regulated investment company shall not be considered as a dividend.
**(b) Other dividends**
(1) **Amount treated as dividend**
(A) *Deduction under section 243* — In any case in which—
(i) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies), and
(ii) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend,
then, in computing any deduction under section 243, there shall be taken into account only that portion of such dividend reported by the regulated investment company as eligible for such deduction in written statements furnished to its shareholders and such dividend shall be treated as received from a corporation which is not a 20-percent owned corporation.
(B) *Maximum rate under section 1(h)*
(i) *In general* — In any case in which—
(I) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies),
(II) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend, and
(III) the qualified dividend income of such investment company for such taxable year is less than 95 percent of its gross income,
then, in computing qualified dividend income, there shall be taken into account only that portion of such dividend reported by the regulated investment company as qualified dividend income in written statements furnished to its
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**(a) Capital gain dividend** For purposes of section 1(h)(11) (relating to maximum rate of tax on dividends) and section 243 (relating to deductions for dividends received by corporations), a capital gain dividend (as defined in section 852(b)(3)) received from a regulated investment company shall not be considered as a dividend.
**(b) Other dividends**
(1) **Amount treated as dividend**
(A) *Deduction under section 243* — In any case in which—
(i) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies), and
(ii) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend,
then, in computing any deduction under section 243, there shall be taken into account only that portion of such dividend reported by the regulated investment company as eligible for such deduction in written statements furnished to its shareholders and such dividend shall be treated as received from a corporation which is not a 20-percent owned corporation.
(B) *Maximum rate under section 1(h)*
(i) *In general* — In any case in which—
(I) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies),
(II) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend, and
(III) the qualified dividend income of such investment company for such taxable year is less than 95 percent of its gross income,
then, in computing qualified dividend income, there shall be taken into account only that portion of such dividend reported by the regulated investment company as qualified dividend income in written statements furnished to its shareholders.
(ii) *Gross income* — For purposes of clause (i), in the case of 1 or more sales or other dispositions of stock or securities, the term “gross income” includes only the excess of—
(I) the net short-term capital gain from such sales or dispositions, over
(II) the net long-term capital loss from such sales or dispositions.
(C) *Limitations*
(i) *Subparagraph (a)* — The aggregate amount which may be reported as dividends under subparagraph (A) shall not exceed the aggregate dividends received by the company for the taxable year.
(ii) *Subparagraph (b)* — The aggregate amount which may be reported as qualified dividend income under subparagraph (B) shall not exceed the sum of—
(I) the qualified dividend income of the company for the taxable year, and
(II) the amount of any earnings and profits which were distributed by the company for such taxable year and accumulated in a taxable year with respect to which this part did not apply.
(2) **Aggregate dividends** — For purposes of this subsection—
(A) *In general* — In computing the amount of aggregate dividends received, there shall only be taken into account dividends received from domestic corporations.
(B) *Dividends* — For purposes of subparagraph (A), the term “dividend” shall not include any distribution from—
(i) 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), or
(ii) a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following).
(C) *Limitations on dividends from regulated investment companies* — In determining the amount of any dividend for purposes of this paragraph, a dividend received from a regulated investment company shall be subject to the limitations prescribed in this section.
(3) **Special rule for computing deduction under section 243** — For purposes of subparagraph (A) of paragraph (1), an amount shall be treated as a dividend for the purpose of paragraph (1) only if a deduction would have been allowable under section 243 to the regulated investment company determined—
(A) as if section 243 applied to dividends received by a regulated investment company,
(B) after the application of section 246 (but without regard to subsection (b) thereof), and
(C) after the application of section 246A.
(4) **Qualified dividend income** — For purposes of this subsection, the term “qualified dividend income” has the meaning given such term by section 1(h)(11)(B).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** Gross income of an employee does not include amounts paid by the employer as a contribution to the Trump account of such employee or of any dependent of such employee if the amounts are paid or incurred pursuant to a program which is described in subsection (c).
**(b) Limitation**
(1) **In general** — The amount which may be excluded under subsection (a) with respect to any employee shall not exceed $2,500.
(2) **Inflation adjustment**
(A) *In general* — In the case of any taxable year beginning after 2027, the $2,500 amount in paragraph (1) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins by substituting “calendar year 2026” for “calendar year 2016” in subparagraph (A)(ii) thereof.
(B) *Rounding* — If any increase determined under subparagraph (A) is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
**(c) Trump account contribution program** For purposes of this section, a Trump account contribution program is a separate written plan of an employer for the exclusive benefit of his employees to provide contributions to the Trump accounts of such employees or dependents of such employees which meets requirements similar to the requirements of paragraphs (2), (3), (6), (7), and (8) of section 129(d).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Requirements applicable to regulated investment companies** The provisions of this part (other than subsection (c) of this section) shall not be applicable to a regulated investment company for a taxable year unless—
(1) the deduction for dividends paid during the taxable year (as defined in section 561, but without regard to capital gain dividends) equals or exceeds the sum of—
(A) 90 percent of its investment company taxable income for the taxable year determined without regard to subsection (b)(2)(D); and
(B) 90 percent of the excess of (i) its interest income excludable from gross income under section 103(a) over (ii) its deductions disallowed under sections 265 and 171(a)(2), and
(2) either—
(A) the provisions of this part applied to the investment company for all taxable years ending on or after November 8, 1983, or
(B) as of the close of the taxable year, the investment company has no earnings and profits accumulated in any taxable year to which the provisions of this part (or the corresponding provisions of prior law) did not apply to it.
The Secretary may waive the requirements of paragraph (1) for any taxable year if the regulated investment company establishes to the satisfaction of the Secretary that it was unable to meet such requirements by reason of distributions previously made to meet the requirements of section 4982.
**(b) Method of taxation of companies and shareholders**
(1) **Imposition of tax on regulated investment companies** — There is hereby imposed for each taxable year upon the investment company taxable income of every regulated investment company a tax computed as provided in section 11, as though the investment company taxable income were the taxable income referred to in section 11.
(2) **Investment company taxable
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:
(1) 50 percent, in the case of dividends other than dividends described in paragraph (2) or (3);
(2) 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 ([15 U.S.C. 661](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section661&num=0&edition=prelim) and following); and
(3) 100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).
**(b) Qualifying dividends**
(1) **In general** — For purposes of this section, the term “qualifying dividend” means any dividend received by a corporation—
(A) if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and
(B) if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group.
(2) **Affiliated group** — For purposes of this subsection:
(A) *In general* — The term “affiliated group” has the meaning given such term by section 1504(a), except that for such purposes sections 1504(b)(2) and 1504(c) shall not apply.
(B) *Group must be consistent in foreign tax treatment* — The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxabl
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Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** Except as otherwise provided in this chapter, a distribution of property (as defined in section 317(a)) made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in subsection (c).
**(b) Amount distributed**
(1) **General rule** — For purposes of this section, the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.
(2) **Reduction for liabilities** — The amount of any distribution determined under paragraph (1) shall be reduced (but not below zero) by—
(A) the amount of any liability of the corporation assumed by the shareholder in connection with the distribution, and
(B) the amount of any liability to which the property received by the shareholder is subject immediately before, and immediately after, the distribution.
(3) **Determination of fair market value** — For purposes of this section, fair market value shall be determined as of the date of the distribution.
**(c) Amount taxable** In the case of a distribution to which subsection (a) applies—
(1) **Amount constituting dividend** — That portion of the distribution which is a dividend (as defined in section 316) shall be included in gross income.
(2) **Amount applied against basis** — That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.
(3) **Amount in excess of basis**
(A) *In general* — Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
(B) *Distributions out of increase in value accrued before March 1, 1913* — Th
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Federal law — U.S. Code and appendices · legal_authorities
### Statutory Notes
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 107; Pub. L. 85–866, title I, § 20(a), Sept. 2, 1958, 72 Stat. 1615; Pub. L. 87–834, § 13(f)(4), Oct. 16, 1962, 76 Stat. 1035; Pub. L. 88–272, title II, § 231(b)(4), Feb. 26, 1964, 78 Stat. 105; Pub. L. 88–484, § 1(a), Aug. 22, 1964, 78 Stat. 596; Pub. L. 89–570, § 1(b)(4), Sept. 12, 1966, 80 Stat. 762; Pub. L. 91–172, title II, § 211(b)(4), title V, § 514(b)(1), Dec. 30, 1969, 83 Stat. 570, 643; Pub. L. 94–455, title II, § 205(c)(2), title XIV, § 1402(b)(1)(B), (2), title XIX, §§ 1901(b)(3)(A), (I), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1535, 1731, 1732, 1792, 1793, 1834; Pub. L. 97–34, title V, § 505(c)(2), Aug. 13, 1981, 95 Stat. 332; Pub. L. 97–248, title II, § 222(e)(5), Sept. 3, 1982, 96 Stat. 480; Pub. L. 98–369, div. A, title I, §§ 43(c)(1), 65(a)–(c), 135(a), title IV, § 492(b)(2), title X, § 1001(b)(2), (e), July 18, 1984, 98 Stat. 558, 584, 669, 854, 1011, 1012; Pub. L. 99–514, title VI, § 631(e)(6), title XVIII, §§ 1804(i)(1), 1899A(8), Oct. 22, 1986, 100 Stat. 2273, 2807, 2958; Pub. L. 100–647, title I, § 1006(e)(18), Nov. 10, 1988, 102 Stat. 3403; Pub. L. 104–188, title I, § 1702(h)(7), Aug. 20, 1996, 110 Stat. 1874; Pub. L. 106–170, title V, § 532(c)(2)(D), Dec. 17, 1999, 113 Stat. 1930; Pub. L. 107–147, title IV, § 417(24)(B)(i), Mar. 9, 2002, 116 Stat. 57, related to collapsible corporations.
#### Effective Date of Repeal
Repeal applicable, except as otherwise provided, to taxable years beginning after Dec. 31, 2002, see section 302(f) of Pub. L. 108–27, set out as an Effective and Termination Dates of 2003 Amendment note under [section 1 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1&num=0&edition=prelim).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Energy credit**
(1) **In general** — For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) **Energy percentage**
(A) *In general* — Except as provided in paragraphs (6) and (7), the energy percentage is—
(i) 6 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,
(III) energy property described in paragraph (3)(A)(ii),
(IV) qualified small wind energy property,
(V) waste energy recovery property,
(VI) energy storage technology,
(VII) qualified biogas property,
(VIII) microgrid controllers, and
(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and
(ii) in the case of any energy property to which clause (i) does not apply, 0 percent.
(B) *Coordination with rehabilitation credit* — The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(C) *Nonapplication of increases to energy percentage* — For purposes of energy property described in subparagraph (A)(ii), the energy percentage applicable to such property pursuant to such subparagraph shall not be increased or otherwise adjusted by any provision of this section.
(3) **Energy property** — For purposes of this subpart, the term “energy property” means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to he
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** No deduction shall be allowed for—
(1) **Expenses** — Any amount otherwise allowable as a deduction which is allocable to one or more classes of income other than interest (whether or not any amount of income of that class or classes is received or accrued) wholly exempt from the taxes imposed by this subtitle, or any amount otherwise allowable under section 212 (relating to expenses for production of income) which is allocable to interest (whether or not any amount of such interest is received or accrued) wholly exempt from the taxes imposed by this subtitle.
(2) **Interest** — Interest on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the taxes imposed by this subtitle.
(3) **Certain regulated investment companies** — In the case of a regulated investment company which distributes during the taxable year an exempt-interest dividend (including exempt-interest dividends paid after the close of the taxable year as described in section 855), that portion of any amount otherwise allowable as a deduction which the amount of the income of such company wholly exempt from taxes under this subtitle bears to the total of such exempt income and its gross income (excluding from gross income, for this purpose, capital gain net income, as defined in section 1222(9)).
(4) **Interest related to exempt-interest dividends** — Interest on indebtedness incurred or continued to purchase or carry shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends.
(5) **Special rules for application of paragraph (2) in the case of short sales** — For purposes of paragraph (2)—
(A) *In general* — The term “interest” includes any
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of a qualified individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of such individual’s section 22 amount for such taxable year.
**(b) Qualified individual** For purposes of this section, the term “qualified individual” means any individual—
(1) who has attained age 65 before the close of the taxable year, or
(2) who retired on disability before the close of the taxable year and who, when he retired, was permanently and totally disabled.
**(c) Section 22 amount** For purposes of subsection (a)—
(1) **In general** — An individual’s section 22 amount for the taxable year shall be the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (d).
(2) **Initial amount**
(A) *In general* — Except as provided in subparagraph (B), the initial amount shall be—
(i) $5,000 in the case of a single individual, or a joint return where only one spouse is a qualified individual,
(ii) $7,500 in the case of a joint return where both spouses are qualified individuals, or
(iii) $3,750 in the case of a married individual filing a separate return.
(B) *Limitation in case of individuals who have not attained age 65*
(i) *In general* — In the case of a qualified individual who has not attained age 65 before the close of the taxable year, except as provided in clause (ii), the initial amount shall not exceed the disability income for the taxable year.
(ii) *Special rules in case of joint return* — In the case of a joint return where both spouses are qualified individuals and at least one spouse has not attained age 65 before the close of the taxable year—
(I) if both spouses have
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Federal law — U.S. Code and appendices · legal_authorities
Page 1971
TITLE 26—INTERNAL REVENUE CODE
§ 854
vestment company in a written notice mailed to its
shareholders not later than 60 days after the close of its
taxable year’’ in text, could not be executed to the text
because the words ‘‘so reported by the regulated invest-
ment company in a written statement furnished to
such shareholder’’ already appeared after the subse-
quent general amendment of subsec. (c) by Pub. L.
113–295 which was effective as if included in the provi-
sions of the American Recovery and Reinvestment Tax
Act of 2009 (Pub. L. 111–5, div. B, title I) to which it re-
lates. However, the substitution was executed to the
heading to reflect the probable intent of Congress. See
2014 Amendment note above and Effective Date of 2014
Amendment note below.
Subsec. (d). Pub. L. 111–325, § 301(d)(2), struck out
‘‘and notifying shareholders’’ after ‘‘election’’ in head-
ing and ‘‘and the notice to shareholders required by
subsection (c)’’ after ‘‘subsection (a)’’ in text.
Statutory Notes and Related Subsidiaries
EFFECTIVE DATE OF 2014 AMENDMENT
Amendment by Pub. L. 113–295 effective as if included
in the provisions of the American Recovery and Rein-
vestment Tax Act of 2009, Pub. L. 111–5, div. B, title I,
to which such amendment relates, see section 209(k) of
Pub. L. 113–295, set out as a note under section 24 of
this title.
EFFECTIVE DATE OF 2010 AMENDMENT
Amendment by Pub. L. 111–325 applicable to taxable
years beginning after Dec. 22, 2010, see section 301(h) of
Pub. L. 111–325, set out as a note under section 852 of
this title.
EFFECTIVE DATE
Pub. L. 111–5, div. B, title I, § 1541(c), Feb. 17, 2009, 123
Stat. 362, provided that: ‘‘The amendments made by
this section [enacting this section and amending sec-
tions 54 and 54A of this
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 854
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