
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC547]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
   Subchapter G--Corporations Used to Avoid Income Tax on Shareholders
 
                   PART II--PERSONAL HOLDING COMPANIES
 
Sec. 547. Deduction for deficiency dividends


(a) General rule

    If a determination (as defined in subsection (c)) with respect to a 
taxpayer establishes liability for personal holding company tax imposed 
by section 541 (or by a corresponding provision of a prior income tax 
law) for any taxable year, a deduction shall be allowed to the taxpayer 
for the amount of deficiency dividends (as defined in subsection (d)) 
for the purpose of determining the personal holding company tax for such 
year, but not for the purpose of determining interest, additional 
amounts, or assessable penalties computed with respect to such personal 
holding company tax.

(b) Rules for application of section

                     (1) Allowance of deduction

        The deficiency dividend deduction shall be allowed as of the 
    date the claim for the deficiency dividend deduction is filed.

                        (2) Credit or refund

        If the allowance of a deficiency dividend deduction results in 
    an overpayment of personal holding company 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 limitation on the filing of claim for 
    refund for the taxable year to which the overpayment relates. No 
    interest shall be allowed on a credit or refund arising from the 
    application of this section.

(c) Determination

    For purposes of this section, the term ``determination'' means--
        (1) a decision by the Tax Court or a judgment, decree, or other 
    order by any court of competent jurisdiction, which has become 
    final;
        (2) a closing agreement made under section 7121; or
        (3) under regulations prescribed by the Secretary, an agreement 
    signed by the Secretary and by, or on behalf of, the taxpayer 
    relating to the liability of such taxpayer for personal holding 
    company tax.

(d) Deficiency dividends

                           (1) Definition

        For purposes of this section, the term ``deficiency dividends'' 
    means the amount of the dividends paid by the corporation on or 
    after the date of the determination and before filing claim under 
    subsection (e), 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 personal 
    holding company tax exists, if distributed during such taxable year. 
    No dividends shall be considered as deficiency dividends for 
    purposes of subsection (a) unless distributed within 90 days after 
    the determination.

               (2) Effect on dividends paid deduction

        (A) For taxable year in which paid

            Deficiency dividends paid in any taxable year (to the extent 
        of the portion thereof taken into account under subsection (a) 
        in determining personal holding company tax) shall not be 
        included in the amount of dividends paid for such year for 
        purposes of computing the dividends paid deduction for such year 
        and succeeding years.

        (B) For prior taxable year

            Deficiency dividends paid in any taxable year (to the extent 
        of the portion thereof taken into account under subsection (a) 
        in determining personal holding company tax) shall not be 
        allowed for purposes of section 563(b) in the computation of the 
        dividends paid deduction for the taxable year preceding the 
        taxable year in which paid.

(e) Claim required

    No deficiency dividend deduction shall be allowed under subsection 
(a) unless (under regulations prescribed by the Secretary) claim 
therefor is filed within 120 days after the determination.

(f) Suspension of statute of limitations and stay of collection

                (1) Suspension of running of statute

        If the corporation files a claim, as provided in subsection (e), 
    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 and 
    all interest, additional amounts, or assessable penalties, shall be 
    suspended for a period of 2 years after the date of the 
    determination.

                       (2) Stay of collection

        In the case of any deficiency with respect to the tax imposed by 
    section 541 established by a determination under this section--
            (A) the collection of the deficiency and all interest, 
        additional amounts, and assessable penalties shall, except in 
        cases of jeopardy, be stayed until the expiration of 120 days 
        after the date of the determination, and
            (B) if claim for deficiency dividend deduction is filed 
        under subsection (e), 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.

(g) Deduction denied in case of fraud, etc.

    No deficiency dividend deduction shall be allowed under subsection 
(a) if the determination contains a finding that any part of the 
deficiency is due to fraud with intent to evade tax, or to wilful 
failure to file an income tax return within the time prescribed by law 
or prescribed by the Secretary in pursuance of law.

(Aug. 16, 1954, ch. 736, 68A Stat. 191; Pub. L. 94-455, title XIX, 
Secs. 1901(a)(78), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1777, 1834.)


                               Amendments

    1976--Subsecs. (c)(3), (e), (g). Pub. L. 94-455, 
Sec. 1906(b)(13)(A), struck out ``or his delegate'' after ``Secretary'' 
wherever appearing.
    Subsec. (h). Pub. L. 94-455, Sec. 1901(a)(78), struck out subsec. 
(h) relating to the effective date of provisions concerning deduction of 
deficiency dividends.


                    Effective Date of 1976 Amendment

    Amendment by section 1901(a)(78) of Pub. L. 94-455 applicable with 
respect to 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.

                  Section Referred to in Other Sections

    This section is referred to in sections 316, 381, 6422, 6503, 6515 
of this title.
