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TITLE 26-INTERNAL REVENUE CODE (d) Loans defined For purposes of this section- (1) Qualifying real property loans The term "qualifying real property loan" means any loan secured by an interest in im- proved real property or secured by an interest in real property which tq to be improved out of the proceeds of the loan, but such term does not include- (A) any loan evidenced by a security (as defined in section 165(g)(2)(C)); (B) any loan, whether or not evidenced by a security (as defined in section 165(g)(2)(C)), the primary obligor on which is- (I) a government or political subdivision or instrumentality thereof; (11) a bank (as defined in section 581); or (ill) another member of the same affili- ated group; (C) any loan, to the extent secured by a deposit in or share of the taxpayer; or (D) any loan which, within a 60-day period beginning in one taxable year of the creditor and ending in its next taxable year, is made or acquired and then repaid or dis- posed of, unless the transactions by which such loan was made or acquired and then repaid or disposed of are established to be for bona fide business purposes. For pur- poses of subparagraph (B)(iii), the term "af- filiated group" has the meaning assigned to such term by section 1504(a); except that (I) the phrase "more than 50 percent" shall be substituted for the phrase "at least 80 per- cent" each place it appears in section 1504(a), and (ii) all corporations shall be treated as includible corporations (without any exclusion under section 1504(b)). (2) Nonqualifying loans The term "nonqualifying loan" means any loan which is not a qualifying real property loan. (3) Loan The term "loan" means debt, as the berm "debt" is used in section 166. (e) Distributions to shareholders (1) In general For purposes of this chapter, any distribu- tion of property (as defined in section 317(a)) by a domestic building and loan association to a shareholder with respect to its stock, if such distribution is not allowable as a deduction under section 591, shall be treated as made- (A) first out of its earnings and profits ac- cumulated in taxable years beginning after December 31, 1951, to the extent thereof, (B) then out of the reserve for losses on qualifying real property loans, to the extent additions to such reserve exceed the addi- tions which would have been allowed under subsection (b)(4), (C) then out of the supplemental reserve for losses on loans, to the extent thereof, ID) then out of such other accounts as may be proper. This paragraph shall apply in the case of any distribution in redemption of stock or in par- tial or complete liquidation of the association, except that any such distribution shall be treated as made first out of the amount re- ferred to in subparagraph (B), second out of the amount referred to in subparagraph (C), third out of the amount referred to in subpar- agraph (A), and then out of such other ac- counts as may be proper. This paragraph shall not apply to any transaction to which section 381 (relating to carryovers in certain corporate acquisitions) applies. (2) Amounts charged to reserve accounts and in- cluded in gross income If any distribution is treated under para- graph (1) as having been made out of the re- serves described in subparagraphs (B) and (C) of such paragraph, the amount charged against such reserve shall be the amount which, when reduced by the amount of tax imposed under this chapter and attributable to the inclusion of such amount in gross income, is equal to the amount of such distri- bution; and the amount so charged against such reserve shall be included in gross income of the taxpayer. (3) Special rules (A) For purposes of paragraph (1)(B), addi- tions to the reserve for losses on qualifying real property loans for the taxable year in which the distribution occurs shall be taken into account. (B) For purposes of computing under this section the amount of a reasonable addition to the reserve for losses on qualifying real property loans for any taxable year, any amount charged during any year to such re- serve pursuant to the provisions of paragraph (2) shall not be taken into account. (Aug. 16, 1954, ch. 736, 68A Stat. 205; Oct. 16, 1962, Pub. L. 87-834, § 6(a), 76 Stat. 977; Dec. 30, 1969, Pub. L. 91-172, title IV, § 432(a), (b), 83 Stat. 620, 622; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1901(a)(84), 90 Stat. 1778.) REFEmmnCS IN TEXT The Tax Reform Act of 1976, referred to in subsec. (c)(2), is Pub. L. 94-455, Oct. 4, 1976, 90 Stat. 1520, which was enacted Oct. 4, 1976. For complete classifi- cation of this Act to the Code, see Tables volume. AMENDMENTS 1976-Subsec. (b)(2). Pub. L. 94-455, § 1901(a)(84)(A), struck from the percentage table in subpar. (A) the years 1969 to 1975, inclusive. Subsec. (b)(2)(E)(i). Pub. L. 94-455, § 1901(a)(84)(D), substituted "subsection (e)" for "subsection (f)" fol- lowing "by reason of". Subsec. (c)(2). Pub. L. 94-455, § 1901(a)(84)(B), added subsec. (c)(2). Former subsec. (c)(2), relating to alloca- tion of pre-1963 reserves for bad debts, was stricken. Subsec. (c)(3). Pub. L. 94-455, § 1901(a)(84)(B), rede- signated former subsec. (c)(6) as subsec. (c)(3). Former subsec. (c)(3), relating to the method of allocation to reserves for bad debts, was stricken. Subsec. (c)(4). Pub. L. 64-455, § 1901(a)(84)(B), struck out subsec. (c)(4) which defined "pre-1963 re- serves". Subsec. (c)(5). Pub. L. 94-455, § 1901(a)(84)(B), struck out subsec. (c)(5) which related to certain pre- 1952 surplus. Subsec. (c)(6). Pub. L. 94-455, § 1901(a)(84)(B), rede- signated former subsec. (c)(6) as subsec. (c)(3). Subsec. (d). Pub. L. 94-455, § 1901(a)(84)(C), struck out subsec. (d relating to the determination of tax- able income for taxpayer which uses the reserve method of accounting for bad debts for taxable years beginning in 1962 and ending in 1963. Former subsecs. (e) and (fM were redesignated (d) and (e), respectively. 71-999 0 - 78 - 30 (Vol. 7) Page 437 § 593