Page:United States Statutes at Large Volume 56 Part 1.djvu/908

 PUBLIC LAWS-CH. 619-OCT. 21, 1942 53 Stat. 867, 20. 26U.s.C.§23 (s), 27 (b). Ante, p. 829. Ante, p. 834. 53 Stat. 867, 21. 26 U.S. c. J§23 (s), 28. Post, p. 897. 53 Stat. 20, 21. 26U.S.C. 27(d), (e), (f), (g), (h), (8). Ante, p. 834. "SEC. 362. TAX ON REGULATED INVESTMENT COMPANIES. "(a) EARNINGS AND PROFITS. - The earnings and profits of a regu- lated investment company for any taxable year beginning after December 31, 1941 (but not its accumulated earnings and profits) shall not be reduced by any amount which is not allowable as a deduction in computing its net income for such taxable year. "(b) METHOD OF TAXATION OF COMPANIES AND SHAREHOLDERS. -In the case of a regulated investment company which distributes during the taxable year to its shareholders as taxable dividends other than capital gain dividends an amount not less than 90 per centum of its net income for the taxable year computed without regard to net long- term and net short-term capital gains, and complies for such year with all rules and regulations prescribed by the Commissioner, with the approval of the Secretary, for the purpose of ascertaining the actual ownership of its outstanding stock: "(1) Its Supplement Q net income shall be its adjusted net income (computed by excluding the excess, if any, of the net long-term capital gain over the net short-term capital loss, and without the net operating loss deduction provided in section 23 (s)) minus the basic surtax credit (excluding capital gain dividends) computed under section 27 (b) without the application of paragraphs (2) and (3). For the purposes of this paragraph, the net income shall be computed without regard to section 47 (c). '.(2) Its Supplement Q surtax net income shall be its net income (computed by excluding the excess, if any, of the net long-term capital gain over the net short-term capital loss, and without the net operating loss deduction provided in section 23 (s)) minus the dividends (other than capital gain dividends) paid during the taxable year increased by the consent dividends credit provided by section 28. For the purposes of this para- graph and paragraph (5) the amount of dividends paid shall be computed in the same manner as provided in subsections (d), (e), (f), (g), (h), and (i) of section 27 for the purpose of the basic surtax credit provided in section 27. For the purposes of this paragraph the net income shall be computed without regard to section 47 (c). " (3) There shall be levied collected, and paid for each taxable year upon its Supplement 4 net income a tax equal to 24 per centum of the amount thereof. "(4) There shall be levied, collected, and paid for each taxable year upon its Supplement Q surtax net income a tax equal to 16 per centum of the amount thereof. "(5) There shall be levied, collected, and paid for each taxable year a tax of 25 per centum of the excess, if any, of the net long- term capital gain over the sum of the net short-term capital loss and the amount of capital gain dividends paid during the year. "(6) A capital gain dividend shall be treated by the share- holders as gains from the sale or exchange of capital assets held for more than 6 months. "(7) A capital gain dividend means any dividend or part thereof which is designated by the company as a capital gain dividend in a written notice mailed to its shareholders at any time prior to the expiration of thirty days after close of its tax- able year. If the aggregate amount so designated with respect to a taxable year of the company is greater than the excess of the net long-term capital gain over the net short-term capital loss of the taxable year, the portion of each distribution which shall be 880 [56 STAT.

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