§547 — Deduction for deficiency dividends

23 cases·10 followed·1 overruled·12 cited—43% support

Statute Text — 26 U.S.C. §547

(a)General rule

If a determination (as defined in subsection (c)) with respect to a taxpayer establishes liability for personal holding company tax imposed by section 541 (or by a corresponding provision of a prior income tax law) for any taxable year, a deduction shall be allowed to the taxpayer for the amount of deficiency dividends (as defined in subsection (d)) for the purpose of determining the personal holding company tax for such year, but not for the purpose of determining interest, additional amounts, or assessable penalties computed with respect to such personal holding company tax.

(b)Rules for application of section

(1)Allowance of deduction

The deficiency dividend deduction shall be allowed as of the date the claim for the deficiency dividend deduction is filed.

(2)Credit or refund

If the allowance of a deficiency dividend deduction results in an overpayment of personal holding company tax for any taxable year, credit or refund with respect to such overpayment shall be made as if on the date of the determination 2 years remained before the expiration of the period of limitation on the filing of claim for refund for the taxable year to which the overpayment relates. No interest shall be allowed on a credit or refund arising from the application of this section.

(c)Determination

For purposes of this section, the term “determination” means—

(1)

a decision by the Tax Court or a judgment, 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 Secretary, an agreement signed by the Secretary and by, or on behalf of, the taxpayer relating to the liability of such taxpayer for personal holding company tax.

(d)Deficiency dividends

(1)Definition

For purposes of this section, the term “deficiency dividends” means the amount of the dividends paid by the corporation on or after the date of the determination 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 personal holding company tax exists, if distributed during such taxable year. No dividends shall be considered as deficiency dividends for purposes of subsection (a) unless distributed within 90 days after the determination.

(2)Effect on dividends paid deduction

(A)For taxable year in which paid

Deficiency dividends paid in any taxable year (to the extent of the portion thereof taken into account under subsection (a) in determining personal holding company tax) shall not be included in the amount of dividends paid for such year for purposes of computing the dividends paid deduction for such year and succeeding years.

(B)For prior taxable year

Deficiency dividends paid in any taxable year (to the extent of the portion thereof taken into account under subsection (a) in determining personal holding company tax) shall not be allowed for purposes of section 563(b) 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 allowed under subsection (a) unless (under regulations prescribed by the Secretary) claim therefor is filed within 120 days after the determination.

(f)Suspension of statute of limitations and stay of collection

(1)Suspension of running of statute

If the corporation files a claim, as provided in subsection (e), the running 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 deficiency and all interest, additional amounts, or assessable penalties, shall be suspended for a period of 2 years after the date of the determination.

(2)Stay of collection

In the case of any deficiency with respect to the tax imposed by section 541 established by a determination under this section—

(A)

the collection of the deficiency and all interest, additional amounts, and assessable penalties shall, except in cases of jeopardy, be stayed until the expiration of 120 days after the date of the determination, and

(B)

if claim for deficiency dividend deduction is filed under subsection (e), the collection of such part of the deficiency as is not reduced by the deduction for deficiency dividends provided in subsection (a) shall be stayed until the date the claim is disallowed (in whole or in part) and if disallowed in part collection shall be made only with respect to the part disallowed.

No distraint or proceeding in court shall be begun for the collection of an amount the collection of which is stayed under subparagraph (A) or (B) during the period for which the collection of such amount is stayed.

(g)Deduction denied in case of fraud, etc.

No deficiency dividend deduction shall be allowed under subsection (a) if the determination contains a finding that any part of the deficiency is due to fraud with intent to evade tax, or to wilful failure to file an income tax return within the time prescribed by law or prescribed by the Secretary in pursuance of law.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.547-1 General rule
Treas. Reg. §Treas. Reg. §1.547-2 Requirements for deficiency dividends
Treas. Reg. §Treas. Reg. §1.547-2(a) §1.547-2(a)
Treas. Reg. §Treas. Reg. §1.547-2(b) §1.547-2(b)
Treas. Reg. §Treas. Reg. §1.547-2(c) §1.547-2(c)
Treas. Reg. §Treas. Reg. §1.547-2(d) §1.547-2(d)
Treas. Reg. §Treas. Reg. §1.547-2(e) §1.547-2(e)
Treas. Reg. §Treas. Reg. §1.547-2(f) §1.547-2(f)
Treas. Reg. §Treas. Reg. §1.547-2(g) Such other information as may be required by the claim form.
Treas. Reg. §Treas. Reg. §1.547-2(v) A determination under section 547(c)(3) may be made by an agreement signed by the district director or such other official to whom authority to sign the agreement is delegated, and by or on behalf of the taxpayer.
Treas. Reg. §Treas. Reg. §1.547-3 Claim for credit or refund
Treas. Reg. §Treas. Reg. §1.547-3(a) If a deficiency in personal holding company tax is asserted for any taxable year, and the corporation has paid any portion of such asserted deficiency, it is entitled to a credit or refund of such payment to the extent that such payment constitutes an overpayment as the result of a deduction for a deficiency dividend as provided in section 547 and §§ 1.
Treas. Reg. §Treas. Reg. §1.547-3(b) No interest shall be allowed on such credit or refund.
Treas. Reg. §Treas. Reg. §1.547-3(c) Such credit or refund will be allowed as if, on the date of the determination under section 547(c) and paragraph (b)(1) of § 1.
Treas. Reg. §Treas. Reg. §1.547-4 Effect on dividends paid deduction
Treas. Reg. §Treas. Reg. §1.547-5 Deduction denied in case of fraud or wilful failure to file timely return
Treas. Reg. §Treas. Reg. §1.547-6 Suspension of statute of limitations and stay of collection
Treas. Reg. §Treas. Reg. §1.547-6(a) Statute of limitations.
Treas. Reg. §Treas. Reg. §1.547-6(b) Stay of collection.
Treas. Reg. §Treas. Reg. §1.547-7 Effective date

23 Citing Cases

Randy Richardson & Melissa Richardson, Petitioners · 2018

547 only to the extent it was otherwise avoidable under 11 U.S.C. sec. 545(2)). Finally, petitioners contended that some ofthe tax liabilities in question had been discharged in bankruptcy. A chapter 7 discharge relieves a debtor from all personal liabilities (incurred before the filing ofthe bankruptcy petition) except those listed in section

Michael Wolff v. United States 773 F.3d 583 · Cir.

Callan v. Commissioner 54 T.C. 1514 · 1970

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Robert Templeton v. Walter O'Cheskey · Cir.

Slobodian v. United States of America Internal Revenue Service 822 F.3d 144 · Cir.

Donald Wayne Bush v. United States · Cir.

Donald Wayne Bush v. United States 939 F.3d 839 · Cir.

Edwin Elliott v. Pacific Western Bank 969 F.3d 1006 · Cir.

In Re Raymond B. Yates, Debtor. William T. Hendon, Trustee v. Raymond B. Yates, M.D., P.C. Profit Sharing Plan Raymond B. Yates, Trustee 287 F.3d 521 · Cir.

Donald Wayne Bush v. United States 100 F.4th 807 · Cir.

Krueger Co. v. Commissioner 79 T.C. 65 · 1982

Adams v. Commissioner 72 T.C. 81 · 1979

C. Blake McDowell, Inc. v. Commissioner 67 T.C. 1043 · 1977

Bell Realty Trust v. Commissioner 65 T.C. 766 · 1976

L. C. Bohart Plumbing & Heating Co. v. Commissioner 64 T.C. 602 · 1975

Nestlé Purina Petcare Co. v. Commissioner 594 F.3d 968 · Cir.

Fleet National Bank v. Gray 375 F.3d 51 · Cir.

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Listecki Ex Rel. Archdiocese of Milwaukee Catholic Cemetery Perpetual Care Trust v. Official Committee of Unsecured Creditors 780 F.3d 731 · Cir.

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Nestle Purina Petcare Co. v. CIR · Cir.