Page 553

TITLE 26-INTERNAL REVENUE CODE (ii) the excess of the net income from foreclosure property (as defined in section 857(b)(4)(B)) over the tax on such income imposed by section 857(b)(4)(A), (B) any increase in the amount of the excess described in section 857(b)(3)(A)(ii) (relating to the excess of the net capital gain over the deduction for capital gains dividends paid), and (C) any decrease in the deduction for divi- dends paid (as defined in section 561) deter- mined without regard to capital gains divi- dends. (2) Interest and additions to tax determined with respect to the amount of deficiency dividend deduction allowed For purposes of determining interest, addi- tions to tax, and additional amounts- (A) the tax imposed by this chapter (after taking into account the deduction allowed by subsection (a)) on the real estate invest- ment trust for the taxable year with respect to which the determination is made shall be deemed to be increased by an amount equal to the deduction allowed by subsection (a) with respect to such taxable year, (B) the last date prescribed for payment of such increase in tax shall be deemed to have been the last date prescribed for the payment of tax (determined in the manner provided by section 6601(c)) for the taxable year with respect to which the determina- tion is made, and (C) such increase in tax shall be deemed to be paid as of the date the claim for the deficiency dividend deduction is filed. (3) Credit or refund If the allowance of a deficiency dividend de- duction results in an overpayment of tax for any taxable year, credit or refund with re- spect to such overpayment shall be made as if on the date of the determination 2 years re- mained before the expiration of the period of limitations on the filing of claim for refund for the taxable year to which the overpay- ment relates. (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 real estate invest- ment trust relating to the liability of such trust for tax. (d) Deficiency dividends (1) Definition For purposes of this section, the term "defi- ciency dividends" means a distribution of property made by the real estate investment trust on or after the date of the determina- tion and before filing claim under subsection (e), which would have been includible in the computation of the deduction for dividends paid under section 561 for the taxable year with respect to which the liability for tax re- sulting from the determination exists, if dis- tributed during such taxablc year. No distri- bution of property shall be considered as defi- ciency dividends for purposes of subsection (a) unless distributed within 90 days after the determination, and unless a claim for a defi- ciency dividend deduction with respect to such distribution is filed pursuant to subsec- tion (e). (2) Limitations (A) Ordinary dividends The amount of deficiency dividends (other than deficiency dividends qualifying as capital gain dividends) paid by a real estate investment trust for the taxable year with respect to which the liability for tax resulting from the determination exists shall not exceed the sum of- (i) the excess of the amount of increase referred to in subparagraph (A) of subsec- tion (b)(1) over the amount of any in- crease in the deduction for dividends paid (computed without regard tc capital gain dividends) for such taxable year which re- sults from such determination, and (ii) the amount of decrease referred to in subparagraph (C) of subsection (b)(1). (B) Capital gain dividends The amount of deficiency dividends quali- fying as capital gain dividends paid by a real estate investment trust for the taxable year with respect to which the liability for tax resulting from the determination exists shall not exceed the amount by which (I) the increase referred to in subparagraph (B) of subsection (b)(1) exceeds (ii) the amount of any dividends paid during such taxable year which are designated as capital gain dividends after such determination. (3) Effect on dividends paid deduction (A) For taxable year in which paid Deficiency dividends paid in any taxable year shall not be included in the amount of dividends paid for such year for purposes of computing the dividends paid deduction for such year. (B) For prior taxable year Deficiency dividends paid in any taxable year shall not be allowed for purposes of section 858(a) in the computation of the dividends paid deduction for the taxable year preceding 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 date of the determination. (f) Suspension of statute of limitations and stay of collection (1) Suspension of running of statute If the real estate investment trust files a claim as provided in subsection (e), the run- ning 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 collection, in respect of the defi- Page 553 § 859