Internal Revenue Code · 26 U.S.C.
§ 860. Deduction for deficiency dividends
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 860
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- November 6, 1978 by Pub. L. 95–600
- Last amended
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 5 dated changes in the source credit
- Length
- 9 subsections · 1,535 words · about 7 min to read
- Defines
- 5 terms
- Cross-references
- cites 7; cited by 9 Code sections and 12 other regulations
- Regulations
- 5 issued under this section
If a determination with respect to any qualified investment entity results in any adjustment for any taxable year, a deduction shall be allowed to such entity for the amount of deficiency dividends for purposes of determining the deduction for dividends paid (for purposes of section 852 or 857, whichever applies) for such year.
If the allowance of a deficiency dividend deduction results in an overpayment of tax for any taxable year, credit or refund with respect to such overpayment shall be made as if on the date of the determination 2 years remained before the expiration of the period of limitations on the filing of claim for refund for the taxable year to which the overpayment relates.
For purposes of this section, the term “deficiency dividends” means a distribution of property made by the qualified investment entity on or after the date of the determination and before filing claim under subsection (g), which would have been includible in the computation of the deduction for dividends paid under section 561 for the taxable year with respect to which the liability for tax resulting from the determination exists if distributed during such taxable year. No distribution of property shall be considered as deficiency dividends for purposes of subsection (a) unless distributed within 90 days after the determination, and unless a claim for a deficiency dividend deduction with respect to such distribution is filed pursuant to subsection (g).
The amount of deficiency dividends qualifying as capital gain dividends paid by a qualified investment entity for the taxable year with respect to which the liability for tax resulting from the determination exists shall not exceed the amount by which (i) the increase referred to in subparagraph (B) of paragraph (1) or (2) of subsection (d) (whichever applies), exceeds (ii) the amount of any dividends paid during such taxable year which are designated or reported (as the case may be) as capital gain dividends after such determination.
Deficiency dividends paid in any taxable year shall not be included in the amount of dividends paid for such year for purposes of computing the dividends paid deduction for such year.
Deficiency dividends paid in any taxable year shall not be allowed for purposes of section 855(a) or 858(a) in the computation of the dividends paid deduction for the taxable year preceding the taxable year in which paid.
If the qualified investment entity files a claim as provided in subsection (g), the running of the statute of limitations provided in section 6501 on the making of assessments, and the bringing of distraint or a proceeding in court for collection, in respect of the deficiency established by a determination under this section, and all interest, additions to tax, additional amounts, or assessable penalties in respect thereof, shall be suspended for a period of 2 years after the date of the determination.
No deficiency dividend deduction shall be allowed under subsection (a) if the determination contains a finding that any part of any deficiency attributable to an adjustment with respect to the taxable year is due to fraud with intent to evade tax or to willful failure to file an income tax return within the time prescribed by law or prescribed by the Secretary in pursuance of law.
(Added Pub. L. 95–600, title III, § 362(a), Nov. 6, 1978, 92 Stat. 2848; amended Pub. L. 96–222, title I, § 103(a)(11)(B), (C), Apr. 1, 1980, 94 Stat. 213; Pub. L. 99–514, title VI, § 667(b)(1), Oct. 22, 1986, 100 Stat. 2306; Pub. L. 108–357, title II, § 243(f)(5), Oct. 22, 2004, 118 Stat. 1445; Pub. L. 111–325, title III, § 301(a)(2), title V, § 501(b), Dec. 22, 2010, 124 Stat. 3542, 3554; Pub. L. 115–141, div. U, title IV, § 401(a)(149), (150), Mar. 23, 2018, 132 Stat. 1191.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 860
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 7 other sections
- § 852 Taxation of regulated investment companies and their shareholders
- § 6601(b) Interest on underpayment, nonpayment, or extensions of time for payment, of tax
- § 561 Definition of deduction for dividends paid
- § 857(b)(4)(B) Taxation of real estate investment trusts and their beneficiaries
- § 7121 Closing agreements
- § 855(a) Dividends paid by regulated investment company after close of taxable year
- § 6501 Limitations on assessment and collection
Cited by 9 Code sections
- § 316(b)(3) Dividend defined
- § 381(c)(23) Carryovers in certain corporate acquisitions
- § 852(b)(3)(C)(v) Taxation of regulated investment companies and their shareholders
- § 857(b)(3)(B) Taxation of real estate investment trusts and their beneficiaries
- § 4981(e)(3) Excise tax on undistributed income of real estate investment trusts
- § 4982(e)(3) Excise tax on undistributed income of regulated investment companies
- § 6422(10) Cross references
- § 6503(k)(5) Suspension of running of period of limitation
- § 6515(5) Cross references
Cited in 12 regulations not issued under it
- § 1.46-4 Limitations with respect to certain persons.
- § 1.50B-5 Limitations with respect to certain persons.
- § 1.56(g)-1 Adjusted current earnings.
- § 1.316-1 Dividends.
- § 1.381(c)(25)-1 Deficiency dividend of a qualified investment entity.
- § 1.671-5 Reporting for widely held fixed investment trusts.
- § 1.852-4 Method of taxation of shareholders of regulated investment companies.
- § 1.856-7 Certain corporations, etc., that are considered to meet the gross income requirements.
- § 1.857-6 Method of taxation of shareholders of real estate investment trusts.
- § 301.6225-2 Modification of imputed underpayment.
- § 301.6226-2 Statements furnished to partners and filed with the IRS.
- § 301.6226-3 Adjustments taken into account by partners.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–141Parts changed in 2018: (f)(2)(A)(ii) (i)
- Amended by Pub. L. 111–325Parts changed in 2010: (f)(2)(B) (j)
- Amended by Pub. L. 108–357Parts changed in 2004: (e)(4)
- Amended by Pub. L. 99–514Parts changed in 1986: (j)
- Amended by Pub. L. 96–222Parts changed in 1980: (f)
- Added by Pub. L. 95–600
Where it sits in the Code
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
Section 857(b)(3)(A), referred to in subsec. (d)(2)(B), relating to alternative tax in case of capital gains, was repealed by Pub. L. 115–97, title I, § 13001(b)(2)(K)(i), Dec. 22, 2017, 131 Stat. 2096. Subsec. (b)(3)(B) of section 857, relating to treatment of capital gain dividends by shareholders, was redesignated subsec. (b)(3)(A) of that section.
Prior Provisions
A prior section 860 was renumbered section 859 of this title.
Amendments
2018—Subsec. (f)(2)(A)(ii). Pub. L. 115–141, § 401(a)(149), substituted “decrease” for “decreased”.
Subsec. (i). Pub. L. 115–141, § 401(a)(150), substituted “willful” for “willfull”.
2010—Subsec. (f)(2)(B). Pub. L. 111–325, § 301(a)(2), inserted “or reported (as the case may be)” after “designated”.
Subsec. (j). Pub. L. 111–325, § 501(b), struck out subsec. (j). Text read as follows: “For assessable penalty with respect to liability for tax of a regulated investment company which is allowed a deduction under subsection (a), see section 6697.”
2004—Subsec. (e)(4). Pub. L. 108–357 added par. (4).
1986—Subsec. (j). Pub. L. 99–514 substituted “regulated investment company” for “qualified investment entity”.
1980—Subsec. (f). Pub. L. 96–222 substituted in heading “Deficiency” for “Efficiency” and in par. (2)(A)(i) “(computed without regard” for “computed without regard”.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Amendment by section 301(a)(2) of Pub. L. 111–325 applicable to taxable years beginning after Dec. 22, 2010, see section 301(h) of Pub. L. 111–325, set out as a note under section 852 of this title.
Pub. L. 111–325, title V, § 501(c), Dec. 22, 2010, 124 Stat. 3554, provided that: “The amendments made by this section [amending this section and repealing section 6697 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 22, 2010].”
Effective Date of 2004 Amendment
Amendment by Pub. L. 108–357 applicable to statements filed after Oct. 22, 2004, see section 243(g)(4)(E) of Pub. L. 108–357, set out as a note under section 856 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 669 of Pub. L. 99–514, set out as a note under section 856 of this title.
Effective Date
Pub. L. 95–600, title III, § 362(e), Nov. 6, 1978, 92 Stat. 2852, as amended by Pub. L. 96–222, title I, § 103(a)(11)(A), Apr. 1, 1980, 94 Stat. 212; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this section [enacting this section, amending sections 316, 381, 852, 857, 6422, 6503, 6515, and 6697 of this title, repealing section 859 of this title, and redesignating prior section 860 as 859 of this title] shall apply with respect to determinations (as defined in section 860(e) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) after the date of the enactment of this Act [Nov. 6, 1978].”