
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC562]

 
                     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 IV--DEDUCTION FOR DIVIDENDS PAID
 
Sec. 562. Rules applicable in determining dividends eligible for 
        dividends paid deduction
        

(a) General rule

    For purposes of this part, the term ``dividend'' shall, except as 
otherwise provided in this section, include only dividends described in 
section 316 (relating to definition of dividends for purposes of 
corporate distributions).

(b) Distributions in liquidation

        (1) Except in the case of a personal holding company described 
    in section 542 or a foreign personal holding company described in 
    section 552--
            (A) in the case of amounts distributed in liquidation, the 
        part of such distribution which is properly chargeable to 
        earnings and profits accumulated after February 28, 1913, shall 
        be treated as a dividend for purposes of computing the dividends 
        paid deduction, and
            (B) in the case of a complete liquidation occurring within 
        24 months after the adoption of a plan of liquidation, any 
        distribution within such period pursuant to such plan shall, to 
        the extent of the earnings and profits (computed without regard 
        to capital losses) of the corporation for the taxable year in 
        which such distribution is made, be treated as a dividend for 
        purposes of computing the dividends paid deduction.

    For purposes of subparagraph (A), a liquidation includes a 
    redemption of stock to which section 302 applies. Except to the 
    extent provided in regulations, the preceding sentence shall not 
    apply in the case of any mere holding or investment company which is 
    not a regulated investment company.
        (2) In the case of a complete liquidation of a personal holding 
    company, occurring within 24 months after the adoption of a plan of 
    liquidation, the amount of any distribution within such period 
    pursuant to such plan shall be treated as a dividend for purposes of 
    computing the dividends paid deduction, to the extent that such 
    amount is distributed to corporate distributees and represents such 
    corporate distributees' allocable share of the undistributed 
    personal holding company income for the taxable year of such 
    distribution computed without regard to this paragraph and without 
    regard to subparagraph (B) of section 316(b)(2).

(c) Preferential dividends

    The amount of any distribution shall not be considered as a dividend 
for purposes of computing the dividends paid deduction, unless such 
distribution is pro rata, with no preference to any share of stock as 
compared with other shares of the same class, and with no preference to 
one class of stock as compared with another class except to the extent 
that the former is entitled (without reference to waivers of their 
rights by shareholders) to such preference. In the case of a 
distribution by a regulated investment company to a shareholder who made 
an initial investment of at least $10,000,000 in such company, such 
distribution shall not be treated as not being pro rata or as being 
preferential solely by reason of an increase in the distribution by 
reason of reductions in administrative expenses of the company.

(d) Distributions by a member of an affiliated group

    In the case where a corporation which is a member of an affiliated 
group of corporations filing or required to file a consolidated return 
for a taxable year is required to file a separate personal holding 
company schedule for such taxable year, a distribution by such 
corporation to another member of the affiliated group shall be 
considered as a dividend for purposes of computing the dividends paid 
deduction if such distribution would constitute a dividend under the 
other provisions of this section to a recipient which is not a member of 
an affiliated group.

(e) Special rules for real estate investment trusts

    In the case of a real estate investment trust, in determining the 
amount of dividends under section 316 for purposes of computing the 
dividends paid deduction, the earnings and profits of such trust for any 
taxable year beginning after December 31, 1980, shall be increased by 
the total amount of gain (if any) on the sale or exchange of real 
property by such trust during such taxable year.

(Aug. 16, 1954, ch. 736, 68A Stat. 198; Pub. L. 88-272, title II, 
Sec. 225(f)(3), Feb. 26, 1964, 78 Stat. 88; Pub. L. 97-248, title II, 
Sec. 222(e)(7), Sept. 3, 1982, 96 Stat. 480; Pub. L. 97-448, title I, 
Sec. 102(c)(2), Jan. 12, 1983, 96 Stat. 2370; Pub. L. 99-514, title VI, 
Sec. 657(a), title XVIII, Sec. 1804(d)(1), Oct. 22, 1986, 100 Stat. 
2299, 2800.)


                               Amendments

    1986--Subsec. (b)(1). Pub. L. 99-514, Sec. 1804(d)(1), inserted at 
end ``Except to the extent provided in regulations, the preceding 
sentence shall not apply in the case of any mere holding or investment 
company which is not a regulated investment company.''
    Subsec. (c). Pub. L. 99-514, Sec. 657(a), inserted at end ``In the 
case of a distribution by a regulated investment company to a 
shareholder who made an initial investment of at least $10,000,000 in 
such company, such distribution shall not be treated as not being pro 
rata or as being preferential solely by reason of an increase in the 
distribution by reason of reductions in administrative expenses of the 
company.''
    1983--Subsec. (e). Pub. L. 97-448 added subsec. (e).
    1982--Subsec. (b)(1). Pub. L. 97-248 inserted sentence at end 
providing that, for purposes of subpar. (A), a liquidation includes a 
redemption of stock to which section 302 applies.
    1964--Subsec. (b). Pub. L. 88-272 designated existing provisions as 
subpars. (A) and (B) of par. (1), excepted personal holding companies in 
section 542, and foreign personal holding companies in section 552 
therefrom, and added par. (2).


                    Effective Date of 1986 Amendment

    Section 657(b) of Pub. L. 99-514 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to distributions 
after the date of the enactment of this Act [Oct. 22, 1986].''
    Section 1804(d)(2) of Pub. L. 99-514 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to 
distributions after September 27, 1985.''


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 97-448 effective, except as otherwise provided, 
as if it had been included in the provision of the Economic Recovery Tax 
Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 
109 of Pub. L. 97-448, set out as a note under section 1 of this title.


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-248 applicable to distributions after Aug. 
31, 1982, with exceptions for certain partial liquidations, see section 
222(f) of Pub. L. 97-248, set out as a note under section 302 of this 
title.


                    Effective Date of 1964 Amendment

    Amendment Pub. L. 88-272 applicable to distributions made in any 
taxable year of the distributing corporation beginning after Dec. 31, 
1963, see section 225(l) of Pub. L. 88-272, set out as a note under 
section 316 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 [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 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.

                  Section Referred to in Other Sections

    This section is referred to in sections 316, 543, 561, 563, 565, 852 
of this title.
