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TITLE 26-INTERNAL REVENUE CODE § 547. Deduction for deficiency dividends (a) General rule If a determination (as defined in subsection (c)) with respect to a taxpayer establishes li- ability for personal holding company tax im- posed by section 541 (or by a corresponding provision of a prior income tax law) for any taxable year, a deduction shall be allowed to the taxpayer for the amount of deficiency divi- dends (as defined in subsection d)) for the pur- pose of determining the personal holding com- pany tax for such year, but not for the purpose of determihing interest, additional amounts, or assessable penalties computed with respect to such personal holding company tax. (b) Rules for application of section (1) Allowance of deduction The deficiency dividend deduction shall be allowed as of the date the claim for the defi- ciency dividend deduction is filed. (2) Credit or refund If the allowance of a deficiency dividend de- duction results in an overpayment of personal holding- company tax for any taxable year, credit or refund with respect to such overpay- ment shall be made as if on the date of the determination 2 years remained before the expiration of the period of limitation on the filing of claim for refund for the taxable year to which the overpayment relates. No interest shall be allowed on a credit or refund arising from the application of this section. (c) Determination For purposes of this section, the term "deter- mination" means- (1) a decision by the Tax Court or a judg- ment, decree, or other order by any court of competent Jurisdiction, which has become final; (2) a closing agreement made under section 7121; or (3) under regulations prescribed by the Sec- retary, an agreement signed by the Secretary and by, or on behalf of, the taxpayer relating to the liability of such taxpayer for personal holding company tax. (d) Deficiency dividends (1) Definition For purposes of this section, the term "defi- ciency dividends" means the amount of the dividends paid by the corporation on or after the date of the determination and before filing claim under subsection (e), which would have been includible in the computation of the deduction for dividends paid under sec- tion 561 for the taxable year with respect to which the liability for personal holding com- pany tax exists, if distributed during such taxable year. No dividends shall be considered as deficiency dividends for purposes of subsec- tion (a) unless distributed within 90 days after the determination. (2) Effect on dividends paid deduction (A) For taxable year in which paid Deficiency dividends paid in any taxable year (to the extent of the portion thereof taken into account under subsection (a) in determining personal holding company tax) shall not be included in the amount of divi. dends paid for such year for purposes of computing the dividends paid deduction for such year and succeeding years. (B) For prior taxable year Deficiency dividends paid in any taxable year (to the extent of the portion thereof taken into account under subsection (a) in determining personal holding company tax) shall not be allowed for purposes of section 563(b) in the computation of the dividends paid deduction for the taxable year preced- ing the taxable year in which paid. (e) Claim required No deficiency dividend deduction shall be al- lowed under subsection (a) unless (under regu- lations prescribed by the Secretary) claim therefor is filed within 120 days after the deter- mination. (f) Suspension of statute of limitations and stay of collection (1) Suspension of running of statute If the corporation files a claim, as provided in subsection (e), 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 collec- tion, in respect of the deficiency and all inter- est, additional amounts, or assessable penal- ties, shall be suspended for a period of 2 years after the date of the determination. (2) Stay of collection In the case of any deficiency with respect to the tax imposed by section 541 established by a determination under this section- (A) the collection of the deficiency and all interest, additional amounts, and assessable penalties shall, except in cases of Jeopardy, be stayed until the expiration of 120 days after the date of the determination, and (B) if claim for deficiency dividend deduc- tion is filed under subsection (e), the collec- tion of such part of the deficiency as is not reduced by the deduction for deficiency dividends provided in subsection Ca) shall be stayed until the date the claim is disallowed (in whole or in part) and if disallowed in part collection shall be made only with re- spect to the part disallowed. No distraint or proceeding in court shall be begun for the collection of an amount the col- lection of which is stayed under subpara- graph (A) or (B) during the period for which the collection of such amount is stayed. (g) Deduction denied in case of fraud, etc. No deficiency dividend deduction shall be al- lowed under subsection (a) if the determination contains a finding that any part of the deficien- cy is due to fraud with intent to evade tax, or to wilful failure to file an income tax return within the time prescribed by law or prescribed by the Secretary in pursuance of law. (Aug. 16, 1954, ch. 736, 68A Stat. 191; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(78), 1906(b)(13)(A), 90 Stat. 1777, 1834.) Page 420