26 U.S.C. § 316 — Dividend defined

Page 1099 TITLE 26—INTERNAL REVENUE CODE § 316 Amendment by section 1901(a)(43) of Pub. L. 94–455 ef- fective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. Amendment by section 1901(b)(32) of Pub. L. 94–455 ef- fective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment by section 211(b)(3) of Pub. L. 91–172 ap- plicable to taxable years beginning after December 31, 1969, see section 211(c) of Pub. L. 91–172, set out as a note under section 301 of this title. Amendment by section 905(b)(2) Pub. L. 91–172 effec- tive with respect to distributions made after Nov. 30, 1969, see section 905(c) of Pub. L. 91–172, set out as a note under section 311 of this title. EFFECTIVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89–570 applicable to taxable years ending after Sept. 12, 1966, but only in respect of expenditures paid or incurred after such date, see sec- tion 3 of Pub. L. 89–570, set out as an Effective Date note under section 617 of this title. EFFECTIVE DATE OF 1964 AMENDMENT Amendment by Pub. L. 88–484 applicable with respect to transactions after Aug. 22, 1964 in taxable years end- ing after such date, see section 2 of Pub. L. 88–484, set out as a note under section 301 of this title. Amendment by Pub. L. 88–272 applicable to disposi- tions after Dec. 31, 1963, in taxable years ending after such date, see section 231(c) of Pub. L. 88–272, set out as an Effective Date note under section 1250 of this title. EFFECTIVE DATE OF 1962 AMENDMENT Amendment by section 13(f)(3) of Pub. L. 87–834 appli- cable to taxable years beginning after Dec. 31, 1962, see section 13(g) of Pub. L. 87–834, set out as an Effective Date note under section 1245 of this title. Pub. L. 87–834, § 14(c), Oct. 16, 1962, 76 Stat. 1041, pro- vided that: ‘‘The amendments made by this section [en- acting sections 1246 and 1247 of this title and amending this section and sections 751 and 1223 of this title] shall apply with respect to taxable years beginning after De- cember 31, 1962.’’ Pub. L. 87–403, § 3(g), Feb. 2, 1962, 76 Stat. 8, provided that: ‘‘The amendments made by this section [amend- ing this section and sections 535, 543, 545, 556 and 561 of this title] shall apply only with respect to distributions made after the date of the enactment of this Act [Feb. 2, 1962].’’ SAVINGS PROVISION For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For 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 Pub. L. 99–514 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 Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. SUBPART C—DEFINITIONS; CONSTRUCTIVE OWNERSHIP OF STOCK Sec. 316. Dividend defined. Sec. 317. Other definitions. 318. Constructive ownership of stock. § 316. Dividend defined (a) General rule For purposes of this subtitle, the term ‘‘divi- dend’’ means any distribution of property made by a corporation to its shareholders— (1) out of its earnings and profits accumu- lated after February 28, 1913, or (2) out of its earnings and profits of the tax- able year (computed as of the close of the tax- able year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made. Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a dis- tribution of property to which section 301 ap- plies, such distribution shall be treated as a dis- tribution of property for purposes of this sub- section. (b) Special rules (1) Certain insurance company dividends The definition in subsection (a) shall not apply to the term ‘‘dividend’’ as used in sub- chapter L in any case where the reference is to dividends of insurance companies paid to pol- icyholders as such. (2) Distributions by personal holding compa- nies (A) In the case of a corporation which— (i) under the law applicable to the tax- able year in which the distribution is made, is a personal holding company (as defined in section 542), or (ii) for the taxable year in respect of which the distribution is made under sec- tion 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year, the term ‘‘dividend’’ also means any dis- tribution of property (whether or not a divi- dend as defined in subsection (a)) made by the corporation to its shareholders, to the extent of its undistributed personal holding company income (determined under section 545 without regard to distributions under this paragraph) for such year. (B) For purposes of subparagraph (A), the term ‘‘distribution of property’’ includes a distribution in complete liquidation occur- ring within 24 months after the adoption of a plan of liquidation, but— (i) only to the extent of the amounts dis- tributed to distributees other than cor- porate shareholders, and (ii) only to the extent that the corpora- tion designates such amounts as a dividend Page 1100 TITLE 26—INTERNAL REVENUE CODE § 317 distribution and duly notifies such distributees of such designation, under regulations prescribed by the Secretary, but (iii) not in excess of the sum of such distributees’ allocable share of the undis- tributed personal holding company income for such year, computed without regard to this subparagraph or section 562(b). (3) Deficiency dividend distributions by a regu- lated investment company or real estate in- vestment trust The term ‘‘dividend’’ also means any dis- tribution of property (whether or not a divi- dend as defined in subsection (a)) which con- stitutes a ‘‘deficiency dividend’’ as defined in section 860(f). (4) Certain distributions by regulated invest- ment companies in excess of earnings and profits In the case of a regulated investment com- pany that has a taxable year other than a cal- endar year, if the distributions by the com- pany with respect to any class of stock of such company for the taxable year exceed the com- pany’s current and accumulated earnings and profits which may be used for the payment of dividends on such class of stock, the com- pany’s current earnings and profits shall, for purposes of subsection (a), be allocated first to distributions with respect to such class of stock made during the portion of the taxable year which precedes January 1. (Aug. 16, 1954, ch. 736, 68A Stat. 98; Mar. 13, 1956, ch. 83, § 5(1), 70 Stat. 49; Pub. L. 88–272, title II, § 225(f)(1), Feb. 26, 1964, 78 Stat. 87; Pub. L. 94–455, title XVI, § 1601(d), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1746, 1834; Pub. L. 95–600, title III, § 362(d)(1), Nov. 6, 1978, 92 Stat. 2851; Pub. L. 111–325, title III, § 305(a), Dec. 22, 2010, 124 Stat. 3549.) Editorial Notes AMENDMENTS 2010—Subsec. (b)(4). Pub. L. 111–325 added par. (4). 1978—Subsec. (b)(3). Pub. L. 95–600 inserted ‘‘regulated investment company or’’ after ‘‘distributions by a’’ in heading and substituted in text ‘‘section 860(f)’’ for ‘‘section 859(d)’’. 1976—Subsec. (b)(2)(B)(ii). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Sec- retary’’. Subsec. (b)(3). Pub. L. 94–455, § 1601(d), added par. (3). 1964—Subsec. (b)(2). Pub. L. 88–272 inserted definition of ‘‘distribution of property’’. 1956—Subsec. (b)(1). Act Mar. 13, 1956, substituted ‘‘subchapter L’’ for ‘‘sections 803(e), 821(a)(2), and 832(c)(11)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111–325, title III, § 305(b), Dec. 22, 2010, 124 Stat. 3549, provided that: ‘‘The amendment made by this section [amending this section] shall apply to dis- tributions made in taxable years beginning after the date of the enactment of this Act [Dec. 22, 2010].’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–600 applicable with respect to determinations (as defined in section 860(e) of this title) after Nov. 6, 1978, see section 362(e) of Pub. L. 95–600, set out as an Effective Date note under section 860 of this title. EFFECTIVE DATE OF 1976 AMENDMENT For effective date of amendment by section 1601(d) of Pub. L. 94–455, see section 1608(a) of Pub. L. 94–455, set out as a note under section 857 of this title. EFFECTIVE DATE OF 1964 AMENDMENT Pub. L. 88–272, title II, § 225(l), Feb. 26, 1964, 78 Stat. 94, provided that: ‘‘(1) The amendments made by this section [enacting section 1022, redesignating former section 1022 as 1023, amending this section and sections 331, 333, 381, 541, 542, 543, 544, 545, 551, 553, 554, 562, 856, 1016, 1361, 6501, and the analysis preceding section 1011, and enacting provisions set out as a note under section 333 of this title] (other than by subsections (c)(1), (f), (g), and (j) [enacting sec- tion 1022, redesignating former section 1022 as 1023, amending this section and sections 331, 333, 542, 551, 562, 1016, and the analysis preceding section 1011 of this title]) shall apply to taxable years beginning after De- cember 31, 1963. ‘‘(2) The amendment made by subsection (c)(1) [amending section 542 of this title] shall apply to tax- able years beginning after October 16, 1962. ‘‘(3) The amendments made by subsections (f) and (g) [amending this section and sections 331, 333, 551, and 562 of this title] shall apply to distributions made in any taxable year of the distributing corporation beginning after December 31, 1963. ‘‘(4) The amendments made by subsection (j) [enact- ing section 1022, redesignating former section 1022 as 1023, and amending section 1016 and the analysis pre- ceding section 1011 of this title] shall apply in respect of decedents dying after December 31, 1963. ‘‘(5) Subsection (h) [set out as a note under section 333 of this title] shall apply to taxable years beginning after December 31, 1963.’’ EFFECTIVE DATE OF 1956 AMENDMENT Act Mar. 13, 1956, ch. 83, § 6, 70 Stat. 49, provided that: ‘‘The amendments made by this Act [amending this section and sections 501, 594, 801 to 805, 811 to 813, 816 to 818, 821, 822, 832, 841, 842, 843, 891, 1201, 1504, and 4371 of this title] shall apply only to taxable years beginning after December 31, 1954.’’ § 317. Other definitions (a) Property For purposes of this part, the term ‘‘property’’ means money, securities, and any other prop- erty; except that such term does not include stock in the corporation making the distribu- tion (or rights to acquire such stock). (b) Redemption of stock For purposes of this part, stock shall be treat- ed as redeemed by a corporation if the corpora- tion acquires its stock from a shareholder in ex- change for property, whether or not the stock so acquired is cancelled, retired, or held as treas- ury stock. (Aug. 16, 1954, ch. 736, 68A Stat. 99.) § 318. Constructive ownership of stock (a) General rule For purposes of those provisions of this sub- chapter to which the rules contained in this sec- tion are expressly made applicable— (1) Members of family (A) In general An individual shall be considered as own- ing the stock owned, directly or indirectly, by or for—