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TITLE 26-INTERNAL REVENUE CODE EFFECTIVE DATE OF 1958 AMENDMENT Amendment of subsec. (b)(1) applicable with respect to taxable years beginning after Sept. 2, 1958, see sec- tion 57(d) of Pub. L. 85-866, set out as an Effective Date of 1958 Amendment note under section 243 of this title. Section 18(b) of Pub. L. 85-866 provided that: "The amendment made by subsection (a) [which added subsec. (C) of this section] shall apply with respect to taxable years ending after December 31, 1957, but only with respect to shares of stock acquired or short sales made after December 31, 1957." SECTION REFERRID TO IN OTHER SECTIONS This section is referred to in sections 172, 804, 809, 812, 822, 852, 857 of this title. § 247. Dividends paid on certain preferred stock of public utilities (a) Amount of deduction In the case of a public utility, there shall be allowed as a deduction an amount computed as follows: (1) First determine the amount which is the lesser of- (A) the amount of dividends paid during the taxable year on its preferred stock, or (B) the taxable income for the taxable year (computed without the deduction al- lowed by this section). (2) Then multiply the amount determined under paragraph (1) by the fraction- (A) the numerator of which is 14 percent, and (B) the denominator of which is that per- centage which equals the sum of the normal tax rate and the surtax rate for the taxable year specified in section 11. For purposes of the deduction provided in this section, the amount of dividends paid shall not include any amount distributed in the current taxable year with respect to dividends unpaid and accumulated in any taxable year ending before October 1, 1942. Amounts distributed in the current taxable year with respect to divi- dends unpaid and accumulated for a prior tax- able year shall for purposes of this subsection be deemed to be distributed with respect to the earliest year or years for which there are divi- dends unpaid and accumulated. (b) Definitions For purposes of this section and section 244- (1) Public utility The term "public utility" means a corpora- tion engaged in the furnishing of telephone service or in the sale of electrical energy, gas, or water, if the rates for such furnishing or sale, as the case may be, have been estab- lished or approved by a State or political sub- division thereof or by an agency or instru- mentality of the United States or by a public utility or public service commission or other similar body of the District of Columbia or of any State or political subdivision thereof. (2) Preferred stock (A) In general The term "preferred stock" means stock issued before October 1, 1942, which during the whole of the taxable year (or the part of the taxable year after its issue) was stock the dividends in respect of which were cu- mulative, limited to the same amount, and payable in preference to the payment of dividends on other stock. (B) Certain stock issued on or after October 1, 1942 Stock issued on or after October 1, 1942, shall be deemed for purposes of this para- graph to have been issued before October 1, 1942, if it was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other pre- ferred stock (including stock which is pre- ferred stock by reason of this subparagraph or subparagraph (D)), but only to the extent that the par or stated value of the new stock does not exceed the par, stated, or face value of the bonds or debentures issued before October 1, 1942, or the other preferred stock, which such new stock is issued to refund or replace. (C) Determination under regulations The determination of whether stock was issued to refund or replace bonds or deben- tures issued before October 1, 1942, or to refund or replace other preferred stock, shall be made under regulations prescribed by the Secretary. (D) Issuance of stock For purposes of subparagraph (B), issu- ance of stock includes issuance either by the same or another corporation in a trans- action which is a reorganization (as defined in section 368(a)), a transaction to which section 371 (relating to insolvency reorgani- zations) applies, or a transaction subject to part VI of subchapter 0 (relating to ex- changes in SEC obedience orders), or the re- spectively corresponding provisions of the Internal Revenue Code of 1939. (Aug. 16, 1954, ch. 736, 68A Stat. 75; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1901(a)(35), 90 Stat. 1770.) REFERENCES IN TEXT The Internal Revenue Code of 1939, referred to in subsec. (b)(2)(D), is act Feb. 10. 1939, ch. 2, 53 Stat. 1, as amended. Prior to the enactment of the Internal Revenue Code of 1954, the 1939 Code was classified to former Title 26, Internal Revenue Code. For table of comparisons of the 1939 Code to the 1954 Code, see Table I preceding section 1 of this title. AMENDMENTS 1976-Subsec. (b)(2). Pub. L. 94-455 divided existing provisions into subpars. (A), (B), (C), and (D), added headings for subpars. (A), (B), (C), and (D), and, in subpar. (C) as so redesignated, substituted "prescribed by the Secretary" for "prescribed by the Secretary or his delegate". EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsec. (b)(2) by section 1901(a)(35) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 172, 244, 246 of this title. Page 208