26 U.S. Code § 860 - Deduction for deficiency dividends
If a determination with respect to any qualified investment entity results in any adjustment for any taxable year, a deduction shall be allowed to such entity for the amount of deficiency dividends for purposes of determining the deduction for dividends paid (for purposes of section 852 or 857, whichever applies) for such year.
If the allowance of a deficiencydividend deduction results in an overpayment of 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 limitations on the filing of claim for refund for the taxable year to which the overpayment relates.
For purposes of this section, the term “deficiency dividends” means a distribution of property made by the qualified investment entity on or after the date of the determination and before filing claim under subsection (g), 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 resulting from the determination exists if distributed during such taxable year. No distribution of property shall be considered as deficiency dividends for purposes of subsection (a) unless distributed within 90 days after the determination, and unless a claim for a deficiency dividend deduction with respect to such distribution is filed pursuant to subsection (g).
The amount of deficiency dividends qualifying as capital gain dividends paid by a qualified investment entity 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 paragraph (1) or (2) of subsection (d) (whichever applies), exceeds (ii) the amount of any dividends paid during such taxable year which are designated or reported (as the case may be) as capital gain dividends after such determination.
If the qualified investment entity files a claim as provided in subsection (g), 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 established by a determination under this section, and all interest, additions to tax, additional amounts, or assessable penalties in respect thereof, shall be suspended for a period of 2 years after the date of the determination.
No deficiencydividend deduction shall be allowed under subsection (a) if the determination contains a finding that any part of any deficiency attributable to an adjustment with respect to the taxable year is due to fraud with intent to evade tax or to willfull  failure to file an income tax return within the time prescribed by law or prescribed by the Secretary in pursuance of law.
 See References in Text note below.
 So in original. Probably should be “decrease”.
 So in original. Probably should be “willful”.
Section 857(b)(3)(A), referred to in subsec. (d)(2)(B), relating to alternative tax in case of capital gains, was repealed by Pub. L. 115–97, title I, § 13001(b)(2)(K)(i), Dec. 22, 2017, 131 Stat. 2096. Subsec. (b)(3)(B) of section 857, relating to treatment of capital gain dividends by shareholders, was redesignated subsec. (b)(3)(A) of that section.
2010—Subsec. (f)(2)(B). Pub. L. 111–325, § 301(a)(2), inserted “or reported (as the case may be)” after “designated”.
Subsec. (j). Pub. L. 111–325, § 501(b), struck out subsec. (j). Text read as follows: “For assessable penalty with respect to liability for tax of a regulated investment company which is allowed a deduction under subsection (a), see section 6697.”
2004—Subsec. (e)(4). Pub. L. 108–357 added par. (4).
1986—Subsec. (j). Pub. L. 99–514 substituted “regulated investment company” for “qualified investment entity”.
1980—Subsec. (f). Pub. L. 96–222 substituted in heading “Deficiency” for “Efficiency” and in par. (2)(A)(i) “(computed without regard” for “computed without regard”.
Pub. L. 95–600, title III, § 362(e), Nov. 6, 1978, 92 Stat. 2852, as amended by Pub. L. 96–222, title I, § 103(a)(11)(A), Apr. 1, 1980, 94 Stat. 212; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
Written determinations for this section
These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. The collection is updated (at our end) daily. It appears that the IRS updates their listing every Friday.
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- Erroneous claim for refund or credit : 2017-07-07
- Accuracy-related penalty : 2017-07-07
- Applicable Rules : 2017-07-07
- Definition of Underpayment : 2017-07-07
- Determination : 2017-07-07
- Deduction for Deficiency Dividends : 2017-07-07
- Interest on Underpayment, Nonpayment, or Extensions of Time for Payment of Tax Interest v. No Interest Imposed : 2017-07-07
- Periods of Limitation on Suits Barred v. Not Barred : 2017-07-07
- Suspension of Statute of Li : 2017-07-07
- Claim Required for Dividend Deduction : 2017-07-07
- Interest and Addition to Tax : 2017-07-07
- Assessable Penalties with Respect to Liability for Tax of Regulated Investment Companies : 2017-07-07
- Adjustments : 2012-09-28
- Determination : 2011-06-17
- Deduction for Deficiency Dividends : 2010-10-29
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