Page 540

TITLE 26-INTERNAL REVENUE CODE (i) the determination of gross income and taxable income, (it) the determination of distributable net income under subchapter J, (iii) the allowance of, or calculation of the amount of, any credit or deduction, and (iv) the determination of the basis in the hands of any shareholder of any share of stock of the company. (c) Earnings and profits The earnings and profits of a regulated in- vestment company for any taxable year (but not its accumulated earnings and profits) shall not be reduced by any amount which is not al- lowable as a deduction in computing its taxable income for such taxable year. For purposes of this subsection, the term "regulated investment company" includes a domestic corporation which is a regulated investment company deter- mined without regard to the requirements of subsection (a). (d) Distributions in redemption of Interests in unit investment trusts In the case of a unit investment trust- (1) which is registered under the Invest- ment Company Act of 1940 (15 U.S.C. 80a-1 and following) and issues periodic payment plan certificates (as defined in such Act), and (2) substantially all of the assets of which consist of securities issued by a management company (as defined in such Act), section 562(c) (relating to preferential divi- dends) shall not apply to a distribution by such trust to a holder of an interest in such trust in redemption of part of all of such interest, with respect to the capital gain net income of such trust attributable to such redemption. (Aug. 16, 1954, ch. 736, 68A Stat. 271; July 11, 1956, ch. 573, § 2(a), 70 Stat. 530; Sept. 2, 1958, Pub. L. 85-866, title I, §§ 39(a), 101(a), (b), 72 Stat. 1638, 1674; Sept. 14, 1960, Pub. L. 86-779, § 10(b)(2), (3), 74 Stat. 1009; Feb. 26, 1964, Pub. L. 88-272, title II, § 229(a)(1), (2), (b), 78 Stat. 99; Dec. 30, 1969, Pub. L. 91-172, title V, § 511(c)(2), 83 Stat. 637; Oct. 4, 1976, Pub. L. 94- 455, title XIV, § 1402(b)(1)(N), title XIX, § 1901(a)(110)(A), (B)(i), (C), (b)(1)(V), (6)(B), (33)(I), (J), (N), 1906(b)(13)(A), title XXI, § 2137, 90 Stat. 1732, 1783, 1792, 1794, 1801, 1802, 1834, 1930, 1931.) TAXABLE YEARS AFTER 1977 Subsecs. (b)(3)(B), (4) of this section amended by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct 4, 1976, 90 Stat. 1732, effec- tive for taxable years beginning after Dec. 31, 1977, by substituting "1 year" for "9 months". REFERENCES IN TEXT The Investment Company Act of 1940, referred to in subsec. (d), is act Aug. 22, 1940, ch. 686, title I, 54 Stat. 789, as amended, which is classified generally to sub- chapter I (Q 80a-1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 80a-51 of Title 15 and Tables volume. AMENDMENTS 1976-Subsec. (a)(1). Pub. L. 94-455, §§ 1901(b)(6)(B), 2137(a), designated existing provisions as introductory material and subpar. (A) and added subpar. (B). Subsec. (a)(2). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b)(1). Pub. L. 94-455, § 1901(b)(1)(V), struck out provision relating to the computation of the normal tax under section 11 of this title. Subsec. (b)(2)(A). Pub. L. 94-455, § 1901(b)(33)(I), substituted "the amount of the net capital gain, if any" for "the excess, if any, of the net long-term cap- ital gain over the short-term capital loss". Subsec. (b)(2)(D). Pub. L. 94-455, § 2137(b), added reference to exempt-interest dividends, Subsec. (b)(3)(A). Pub. L. 94-455, § 1901(b)(33)(J)(i), among other changes, struck out reference to the sum of the net short-term capital loss. Subsec. (b)(3)(B). Pub. L. 94-455, § 1402(b)(1)(N), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. Subsec. (b)(3)(C). Pub. L. 94-455, § 1901(a)(110)(A), (b)(33)(J)(ii), substituted "net capital gain" for "excess of the net long-term capital gain over the net short- term capital loss" in two places and struck out provi- sion requiring for purpose of the deduction for capital gains dividends paid, the deductions shall in the case of a taxable year beginning before Jan. 1, 1975, first be made from the amount subject to tax In accordance with section 1201(a)(1)(B), to the extent thereof, and then from the amount subject to tax in accordance with section 1201(a)(1)(A). Subsec. (b)(3)(D)(iii). Pub. L. 94-455, § 1901(a)(110)(B)(i), struck out "by 75 percent of so much of such amounts as equals the amount subject to tax in accordance with section 1201(a)(1)(A) and" following "his long term capital gains," and "(72 per- cent in the case of a taxable year beginning after De- cember 31, 1969, and before January 1, 1971)" follow- ing "by 70 percent" and substituted "section 1201(a)" for "section 1201(a)(1)(B) or (2)". Subsec. (b)(3)(D)(v). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b)(4). Pub. L. 94-455, § 1402(b)(1)(N), pro- vided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. Subsec. (b)(5). Pub. L. 94-455, § 2137(c), added subsec. (b)(5). Subsec. (d). Pub. L. 94-455, § 1901(a)(110)(C), (b)(33)(N), inserted in par. (1) "(15 U.S.C. 80a-1 and following)" following "Investment company Act of 1940" and substituted in provision following par. (2) "capital gain net income" for "net capital gain". 1969-Subsec. (b)(3)(A). Pub. L. 91-172, § 511(c)(2)(A), substituted "determined as provided in section 1201(a), on" for "of 25 percent of". Subsec. (b)(3)(C). Pub. L. 91-172, §511(c)(2)(B), added provision requiring for the purposes of the de- duction for capital gains dividends paid the deduction shall, in the case of a taxable year beginning before Jan. 1, 1975, first be made from the amount subject to tax in accordance with section 1201(a)(1)(B), to the extent thereof, and then from the amount subject to tax in accordance with section 1201(a)(1)(A). Subsec. (b)(3)(D). Pub. L. 91-172, § 511(c)(2)(C), (D), struck out "of 25 percent" in cl. (it), substituted refer- ence in cl. (i1) to the increase of the adjusted basis of shares in the hands of the shareholder, with respect to the amounts required by this subpar., by 75 percent of so much of such amounts as equals the amount sub- ject to tax in accordance with section 1201(a)(1)(A) and by 70 percent (72 percent in the case of a taxable year beginning after Dec. 31, 1969, and before Jan. 1, 1971) of so much of such amounts as equals the amount subject to tax in accordance with section 1201(a)(1)(B) or (2), for reference to the increase of the adjusted basis of shares in the hand of the share. holder by 75 percent of the amounts required by this subpar. to be included in computing his long-term cap- ital gains. Page 540 § 852