26 U.S.C. § 565 : US Code - Section 565: Consent dividends

Search 26 U.S.C. § 565 : US Code - Section 565: Consent dividends

(a) General rule
If any person owns consent stock (as defined in subsection
(f)(1)) in a corporation on the last day of the taxable year of
such corporation, and such person agrees, in a consent filed with
the return of such corporation in accordance with regulations
prescribed by the Secretary, to treat as a dividend the amount
specified in such consent, the amount so specified shall, except as
provided in subsection (b), constitute a consent dividend for
purposes of section 561 (relating to the deduction for dividends
paid).
(b) Limitations
A consent dividend shall not include -
(1) an amount specified in a consent which, if distributed in
money, would constitute, or be part of, a distribution which
would be disqualified for purposes of the dividends paid
deduction under section 562(c) (relating to preferential
dividends), or
(2) an amount specified in a consent which would not constitute
a dividend (as defined in section 316) if the total amounts
specified in consents filed by the corporation had been
distributed in money to shareholders on the last day of the
taxable year of such corporation.
(c) Effect of consent
The amount of a consent dividend shall be considered, for
purposes of this title -
(1) as distributed in money by the corporation to the
shareholder on the last day of the taxable year of the
corporation, and
(2) as contributed to the capital of the corporation by the
shareholder on such day.
(d) Consent dividends and other distributions
If a distribution by a corporation consists in part of consent
dividends and in part of money or other property, the entire amount
specified in the consents and the amount of such money or other
property shall be considered together for purposes of applying this
title.
(e) Nonresident aliens and foreign corporations
In the case of a consent dividend which, if paid in money would
be subject to the provisions of section 1441 (relating to
withholding of tax on nonresident aliens) or section 1442 (relating
to withholding of tax on foreign corporations), this section shall
not apply unless the consent is accompanied by money, or such other
medium of payment as the Secretary may by regulations authorize, in
an amount equal to the amount that would be required to be deducted
and withheld under sections 1441 or 1442 if the consent dividend
had been, on the last day of the taxable year of the corporation,
paid to the shareholder in money as a dividend. The amount
accompanying the consent shall be credited against the tax imposed
by this subtitle on the shareholder.
(f) Definitions
(1) Consent stock
Consent stock, for purposes of this section, means the class or
classes of stock entitled, after the payment of preferred
dividends, to a share in the distribution (other than in complete
or partial liquidation) within the taxable year of all the
remaining earnings and profits, which share constitutes the same
proportion of such distribution regardless of the amount of such
distribution.
(2) Preferred dividends
Preferred dividends, for purposes of this section, means a
distribution (other than in complete or partial liquidation),
limited in amount, which must be made on any class of stock
before a further distribution (other than in complete or partial
liquidation) of earnings and profits may be made within the
taxable year.