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TITLE 26-INTERNAL REVENUE CODE (b) Limitation on aggregate amount of deductions (1) General rule Except as provided in paragraph (2), the ag- gregate amount of the deductions allowed by sections 243(a)(1), 244(a), and 245 shall not exceed 85 percent of the taxable income com- puted without regard to the deductions al- lowed by sections 172, 243(a)(1), 244(a), 245, and 247, and without regard to any capital loss carryback to the taxable year under sec- tion 1212(a)(1). (2) Effect of net operating loss Paragraph (1) shall not apply for any tax- able year for which there Is a net operating loss (as determined under section 172). (c) Exclusion of certain dividends (1) In general No deduction shall be allowed under section 243, 244, or 245, in respect of any dividend on any share of stock- (A) which is sold or otherwise disposed of in any case in which the taxpayer has held such share for 15 days or less, or (B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make corre- sponding payments with respect to substan- tially identical stock or securities. (2) 90-day rule in the case of certain preference dividends In the case of any stock having preference in dividends, the holding period specified in paragraph (1)(A) shall be 90 days in lieu of 15 days if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days. (3) Determination of holding periods For purposes of this subsection, in deter- mining the period for which the taxpayer has held any share of stock- (A) the day of disposition, but not the day of acquisition, shall be taken into account, (B) there shall not be taken into account any day which is more than 15 days (or 90 days in the case of stock to which para- graph (2) applies) after the date on which such share becomes ex-dividend, and (C) paragraph (4) of section 1223 shall not apply. The holding periods determined under the preceding provisions of this paragraph shall be appropriately reduced (in the manner pro- vided In regulations prescribed by the Secre- tary) for any period (during such holding pe- riods) in which the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially identical stock or securities. (d) Dividends from a DISC or former DISC No deduction shall be allowed under section 243 in respect of a dividend from a corporation which is a DISC or former DISC (as defined in section 992(a)) to the extent such dividend is paid out of the corporation's accumulated DISC income or previously taxed income, or is a deemed distribution pursuant to section 995(b)(1). (e) Cross reference For special rule relating to mutual savings banks, etc.. to which section 593 applies, see section 596. (Aug. 16, 1954, ch. 736, 68A Stat. 74; Sept. 2, 1958, Pub. L. 85-866, title I, §§ 18(a), 57(c)(2), 72 Stat. 1614, 1646; Feb. 26, 1964, Pub. L. 88-272, title II, § 214(b)(2), 78 Stat. 55; Dec. 30, 1969, Pub. L. 91-172, title IV, §434(b)(1), title V, § 512(f)(3), 83 Stat. 625, 641; Dec. 10, 1971, Pub. L. 92-178, title V, § 502(a), 85 Stat. 549; Oct. 4, 1976, Pub. L, 94-455, title X. § 1051(f)(3), title XIX, § 1906(b)(13)(A), 90 Stat. 1646, 1834.) AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, § 1051(f)(3), struck out references to dividends from corporations orga- nized under the China Trade Act, 1922, and corpora- tions to which section 931 (relating to income from sources within possessions of the United States) ap- plies. Subsec. (c)(3). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". 1971-Subsec, (d). Pub. L. 92-178 added subsec. (d), Former subsec. (d) redesignated (e). Subsec. (e). Pub. L. 92-178 redesignated former subsec. (d) as (e). 1969-Subsec. (b)(1). Pub. L. 91-172, § 512(f)(3), sub- stituted "and 247, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1)" for "and 247". Subsec. (d. Pub. L. 91-172, § 434(b)(1), added subsec. (d. 1964-Subsec. (b). Pub. L. 88-272 substituted "243(a)(1), 244(a)" for "243(a), 244" wherever appear- Ing. 1958-Subsec. (b)(1). Pub. L. 85-866, § 57(c)(2), sub- stituted "243(a)" for "243" wherever appearing. Subsec. (c. Pub. L. 85-866, § 18(a), added subsec. (c). EFFECTIVE DATE OF 1976 AMENDMENT For effective date of amendment of subsec. (a) by section 1051(f)(3) of Pub. L. 94-455, see section 1051(i) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 33 of this title. Amendment of subsec. (c)(3) by section 1906(b)(13)(A) of Pub. L. 94-455 effective Feb. 1, 1977, see section 1906(d)(1) of Pub. L. 94-455, set out as Ef- fective Date of 1976 Amendment note under section 6013 of this title. EFFECTIVE DATE OF 1971 AMENDMENT Enactment of subsec. (d) of this section by Pub. L. 92-178 applicable with respect to taxable years ending after Dec. 31, 1971, except that a corporation may not be a DISC for any taxable year beginning before Jan. 1, 1972, see section 507 of Pub. L. 92-178, set out as an Effective Date note under section 991 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment of subsec. (b)(1) of this section by sec- tion 512(f)(3) of Pub. L. 91-172 applicable with respect to net capital losses sustained in taxable years begin- ning after Dec. 31, 1969, see section 512(g) of Pub. L. 91-172, set out as an Effective Date of 1969 Amend- ment note under section 1212 of this title. Subsec. (d) of this section applicable to taxable years beginning after July 11, 1969, see section 434(c) of Pub. L. 91-172, set out as an Effective Date note under section 596 of this title. EFFECTIVE DATE OF 1964 AMENDMENT Amendment by Pub. L. 88-272 applicable to divi- dends received in taxable years ending after Dec. 31, 1963, see section 214(c) of Pub. L. 88-272, set out as an Effective Date of 1964 Amendment note under section 243 of this title. § 2416 Page 207