Earnings and profits
(1) Treatment of nondeductible items
(1)Treatment of nondeductible items#
(A) Net capital loss If a regulated investment company has a net capital loss for any taxable year— (i) such net capital loss shall not be taken into account for purposes of determining the company’s earnings and profits, and (ii) any capital loss arising on the first day of the next taxable year by reason of clause (ii) or (iii) of section 1212(a)(3)(A) shall be treated as so arising for purposes of determining earnings and profits.
(B) Other nondeductible items (i) In general The earnings and profits of a regulated investment company for any taxable year (but not its accumulated earnings and profits) shall not be reduced by any amount which is not allowable as a deduction (other than by reason of section 265 or 171(a)(2)) in computing its taxable income for such taxable year. (ii) Coordination with treatment of net capital losses Clause (i) shall not apply to a net capital loss to which subparagraph (A) applies.
(1)(A)Net capital loss#
If a regulated investment company has a net capital loss for any taxable year—
(i) such net capital loss shall not be taken into account for purposes of determining the company’s earnings and profits, and
(ii) any capital loss arising on the first day of the next taxable year by reason of clause (ii) or (iii) of section 1212(a)(3)(A) shall be treated as so arising for purposes of determining earnings and profits.
(1)(A)(i)#
such net capital loss shall not be taken into account for purposes of determining the company’s earnings and profits, and
(2)Coordination with tax on undistributed income#
For purposes of applying this chapter to distributions made by a regulated investment company with respect to any calendar year, the earnings and profits of such company shall be determined without regard to any net capital loss attributable to the portion of the taxable year after October 31, without regard to any late-year ordinary loss (as defined in subsection (b)(8)(D)), without regard to any capital loss arising on the first day of the taxable year by reason of clauses (ii) and (iii) of section 1212(a)(3)(A), and with such other adjustments as the Secretary may prescribe. The preceding sentence shall apply—
(A) only to the extent that the amount distributed by the company with respect to the calendar year does not exceed the required distribution for such calendar year (as determined under section 4982 by substituting “100 percent” for each percentage set forth in section 4982(b)(1)), and
(B) except as provided in regulations, only if an election under section 4982(e)(4) is not in effect with respect to such company.
(2)(A)#
only to the extent that the amount distributed by the company with respect to the calendar year does not exceed the required distribution for such calendar year (as determined under section 4982 by substituting “100 percent” for each percentage set forth in section 4982(b)(1)), and
(2)(B)#
except as provided in regulations, only if an election under section 4982(e)(4) is not in effect with respect to such company.
(3)Distributions to meet requirements of subsection (a)(2)(B)#
Any distribution which is made in order to comply with the requirements of subsection (a)(2)(B)—
(A) shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from earnings and profits which, but for the distribution, would result in a failure to meet such requirements (and allocated to such earnings on a first-in, first-out basis), and
(B) to the extent treated under subparagraph (A) as made from accumulated earnings and profits, shall not be treated as a distribution for purposes of subsection (b)(2)(D) and section 855.
(3)(A)#
shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from earnings and profits which, but for the distribution, would result in a failure to meet such requirements (and allocated to such earnings on a first-in, first-out basis), and
(3)(B)#
to the extent treated under subparagraph (A) as made from accumulated earnings and profits, shall not be treated as a distribution for purposes of subsection (b)(2)(D) and section 855.
(4)Regulated investment company#
For purposes of this subsection, the term “regulated investment company” includes a domestic corporation which is a regulated investment company determined without regard to the requirements of subsection (a).