§316. Dividend defined
(a) General rule
For purposes of this subtitle, the term "dividend" means any distribution of property made by a corporation to its shareholders-
(1) out of its earnings and profits accumulated after February 28, 1913, or
(2) out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a distribution of property to which section 301 applies, such distribution shall be treated as a distribution of property for purposes of this subsection.
(b) Special rules
(1) Certain insurance company dividends
The definition in subsection (a) shall not apply to the term "dividend" as used in subchapter L in any case where the reference is to dividends of insurance companies paid to policyholders as such.
(2) Distributions by personal holding companies
(A) In the case of a corporation which-
(i) under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or
(ii) for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year,
the term "dividend" also means any distribution of property (whether or not a dividend as defined in subsection (a)) made by the corporation to its shareholders, to the extent of its undistributed personal holding company income (determined under section 545 without regard to distributions under this paragraph) for such year.
(B) For purposes of subparagraph (A), the term "distribution of property" includes a distribution in complete liquidation occurring within 24 months after the adoption of a plan of liquidation, but-
(i) only to the extent of the amounts distributed to distributees other than corporate shareholders, and
(ii) only to the extent that the corporation designates such amounts as a dividend distribution and duly notifies such distributees of such designation, under regulations prescribed by the Secretary, but
(iii) not in excess of the sum of such distributees' allocable share of the undistributed personal holding company income for such year, computed without regard to this subparagraph or section 562(b).
(3) Deficiency dividend distributions by a regulated investment company or real estate investment trust
The term "dividend" also means any distribution of property (whether or not a dividend as defined in subsection (a)) which constitutes a "deficiency dividend" as defined in section 860(f).
(Aug. 16, 1954, ch. 736,
Amendments
1978-Subsec. (b)(3).
1976-Subsec. (b)(2)(B)(ii).
Subsec. (b)(3).
1964-Subsec. (b)(2).
1956-Subsec. (b)(1). Act Mar. 13, 1956, substituted "subchapter L" for "sections 803(e), 821(a)(2), and 832(c)(11)".
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1976 Amendment
For effective date of amendment by section 1601(d) of
Effective Date of 1964 Amendment
Section 225(l) of
"(1) The amendments made by this section [enacting section 1022, redesignating former section 1022 as 1023, amending this section and sections 331, 333, 381, 541, 542, 543, 544, 545, 551, 553, 554, 562, 856, 1016, 1361, 6501, and the analysis preceding section 1011, and enacting provisions set out as a note under section 333 of this title] (other than by subsections (c)(1), (f), (g), and (j) [enacting section 1022, redesignating former section 1022 as 1023, amending this section and sections 331, 333, 542, 551, 562, 1016, and the analysis preceding section 1011 of this title]) shall apply to taxable years beginning after December 31, 1963.
"(2) The amendment made by subsection (c)(1) [amending section 542 of this title] shall apply to taxable years beginning after October 16, 1962.
"(3) The amendments made by subsections (f) and (g) [amending this section and sections 331, 333, 551, and 562 of this title] shall apply to distributions made in any taxable year of the distributing corporation beginning after December 31, 1963.
"(4) The amendments made by subsection (j) [enacting section 1022, redesignating former section 1022 as 1023, and amending section 1016 and the analysis preceding section 1011 of this title] shall apply in respect of decedents dying after December 31, 1963.
"(5) Subsection (h) [set out as a note under section 333 of this title] shall apply to taxable years beginning after December 31, 1963."
Effective Date of 1956 Amendment
Section 6 of act Mar. 13, 1956, provided that: "The amendments made by this Act [amending this section and sections 501, 594, 801 to 805, 811 to 813, 816 to 818, 821, 822, 832, 841, 842, 843, 891, 1201, 1504, and 4371 of this title] shall apply only to taxable years beginning after December 31, 1954."
Cross References
Consent dividend as not including an amount specified in a consent which would not constitute a dividend as defined in this section, see section 565 of this title.
Dividends received from certain foreign corporations, deduction in amount equal to percent of dividends received out of earnings and profits specified in subsection (a)(1) of this section, see section 245 of this title.
Rules applicable in determining dividends eligible for dividends paid credit deduction, see section 562 of this title.
Section Referred to in Other Sections
This section is referred to in sections 301, 331, 562, 565, 956A, 959, 6042, 7518 of this title; title 46 App. section 1177.