Page:United States Statutes at Large Volume 53 Part 1.djvu/31

 INCOME TAX 19 of Congress which is allowed to an individual as a credit for pur- poses of normal tax by section 25 (a) (1) or (2). (b) DIVIDENDS RECEIVED. -85 per centum of the amount received as dividends from a domestic corporation which is subject to taxa- tion under this chapter, but not in excess of 85 per centum of the adjusted net income. The credit allowed by this subsection shall not be allowed in respect of dividends received from a corporation or- ganized under the China Trade Act, 1922, 42 Stat. 849 (U. S . C ., Title 15, c. 4), or from a corporation which under section 251 is taxable only on its gross income from sources within the United States by reason of its receiving a large percentage of its gross income from sources within a possession of the United States. (c) NET OPERATING Loss OF PRECEDING YEAR. - (1) AMOUNT OF CREDIT.- The amount of the net operating loss (as defined in paragraph (2)) of the corporation for the preceding taxable year (if beginning after December 31, 1937), but not in excess of the adjusted net income for the taxable year. (2) DEFrNITION.-As used in this chapter the term "net operat- ing loss" means the excess of the deductions allowed by this chapter over the gross income, with the following exceptions and limitations- (A) The deduction for depletion shall not exceed the amount which would be allowable if computed without reference to discovery value or to percentage depletion under section 114 (b) (2), (3), or (4); (B) There shall be included in computing gross income the amount of interest received which is wholly exempt from the taxes imposed by this chapter, decreased by the amount of interest paid or accrued which is not allowed as a deduction by section 23 (b), relating to interest on indebtedness incurred or continued to purchase or carry certain tax-exempt obligations. In the case of a taxable year beginning after December 31, 1937, and before January 1, 1939, the term "net operating loss" means net operating loss as defined in section 26 (c) of the Revenue Act of 1938, 52 Stat. 467. (d) BANK AFFLATES. -In the case of a holding company affiliate (as defined in section 2 of the Banking Act of 1933), the amount of the earnings or profits which the Board of Governors of the Federal Reserve System certifies to the Commissioner has been devoted by such affiliate during the taxable year to the acquisition of readily marketable assets other than bank stock in compliance with section 5144 of the Revised Statutes. The aggregate of the credits allowable under this subsection for all taxable years beginning after December 31, 1935, shall not exceed the amount required to be devoted under such section 5144 to such purposes, and the amount of the credit for any taxable year shall not exceed the adjusted net income for such year. (e) DIVIDENDS PAID CREDIT.- For corporation dividends paid credit, see section 27. (f) CONSENT DIVIDENDS CREDIT.- For corporation consent dividends credit, see section 28. SEC. 27. CORPORATION DIVIDENDS PAID CREDIT. (a) DEFINITION IN GENERAL.- As used in this chapter with respect to any taxable year the term "dividends paid credit" means the sum of: (1) The basic surtax credit for such year, computed as provided in subsection (b); (2) The dividend carry-over to such year, computed as provided in subsection (c); (3) The amount, if any by which any deficit in the accumulated earnings and profits, as of the close of the preceding taxable year

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