Page:United States Statutes at Large Volume 68A.djvu/114

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INTERNAL REVENUE CODE OF 1954.

engaged in trade or business within the United States and has derived 50 percent or more of its gross income from sources within the United States, there shall be allowed as a deduction in the case of a corporation— (1) An amount equal to the percent (specified in section 243 for the taxable year) of the dividends received out of its earnings and profits specified in paragraph (2) of the first sentence of section 316 (a), but such amount shall not exceed an amount which bears the same ratio to such percent of such dividends received out of such earnings and profits as the gross income of such foreign corporation for the taxable year from sources within the United States bears to its gross income from all sources for such taxable year, and (2) An amount equal to the percent (specified in section 243 for the taxable year) of the dividends received out of that part of its earnings and profits specified in paragraph (1) of the first sentence of section 316(a) accumulated after the beginning of such uninterrupted period, but such amount shall not exceed an amount which bears the same ratio to such percent of such dividends received out of such accumulated earnings and profits as the gross income of such foreign corporation from sources within the United States for the portion of such uninterrupted period ending at the beginning of such taxable year bears to its gross income from all sources for such portion of such uninterrupted period. SEC. 246. RULES APPLYING TO DEDUCTIONS FOR DIVIDENDS RECEIVED. (a) DEDUCTION N O T ALLOWED FOR DIVIDENDS F R O M

CERTAIN

CORPORATIONS.—The deductions allowed by sections 243, 244, and 245 shall not apply to any dividend from— (1) a corporation organized under the China Trade Act, 1922 (see sec. 941); or (2) a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is— (A) a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers' cooperative associations); or (B) a corporation to which section 931 (relating to income from som-ces within possessions of the United States) applies. (b) LIMITATION ON AGGREGATE AMOUNT OF DEDUCTIONS. —

(1) GENERAL RULE.—Except as provided in paragraph (2), the aggregate amount of the deductions allowed by sections 243, 244, and 245 shall not exceed 85 percent of the taxable income computed without regard to the deductions allowed by sections 172, 243, 244, 245, and 247. (2) E F F E C T OF NET OPERATING LOSS.—Paragraph (1) shall not apply for any taxable year for which there is a net operating loss (as determined under section 172).

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