Page:United States Statutes at Large Volume 68A.djvu/238

 198

INTERNAL REVENUE CODE OF 1954 '

(A) that the rent or other compensation received was the highest obtainable, or, if none was received, that none was obtainable; (B) that the property was held in the course of a business carried on bona fide for profit; and (C) either that there was reasonable expectation that the operation of the property would result in a profit, or that the property was necessary to the conduct of the business. (6) T A X E S AND CONTRIBUTIONS TO PENSION TRUSTS.—The deductions provided in section 164(e) (relating to taxes of a shareholder paid by the corporation) and in section 404 (relating to pension, etc., trusts) shall not be allowed. SEC. 557. INCOME NOT PLACED ON ANNUAL BASIS.

Section 443(b) (relating to computation of tax on change of annual accounting period) shall not apply in the computation of the undistributed foreign personal holding company income under section 556. PART IV—DEDUCTION FOR DIVIDENDS PAID Sec. 661. Definition of deduction for dividends paid. Sec. 562. Rules applicable in determining dividends eligible for dividends paid deduction. Sec. 563. Rules relating to dividends paid after close of taxable year. Sec. 564. Dividend carryover. Sec. 565. Consent dividends. SEC. 561. DEFINITION OF DEDUCTION FOR DIVIDENDS PAID. (a) GENERAL RULE. — The deduction for dividends paid shall be

the sum of— (1) the dividends paid during the taxable year, (2) the consent dividends for the taxable year (determined under section 565), and (3) in the case of a personal holding company, the dividend carryover described in section 564. (b) SPECIAL RULES APPLICABLE.—In determining the deduction for dividends paid, the rules provided in section 562 (relating to rules applicable in determining dividends eligible for dividends paid deduction) and section 563 (relating to dividends paid after the close of the taxable year) shall be applicable. SEC. 562. RULES APPLICABLE IN DETERMINING DIVIDENDS ELIGIBLE FOR DIVIDENDS PAID DEDUCTION. (a) GENERAL RULE. — For purposes of this part, the term "divi-

dend" 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.—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. 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 § 556(b)(5)(A)

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