TITLE 26 - US CODE - PART VIII - SPECIAL DEDUCTIONS FOR CORPORATIONS

26 USC 241 - Allowance of special deductions

In addition to the deductions provided in part VI (sec. 161 and following), there shall be allowed as deductions in computing taxable income the items specified in this part.

26 USC 242 - Repealed. Pub. L. 94455, title XIX, 1901(a)(33), Oct. 4, 1976, 90 Stat. 1769]

Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 72; Feb. 26, 1964, Pub. L. 88–272, title I, § 123(c), 78 Stat. 30, allowed to corporations as a deduction the amount received as interest on obligations of the United States or on obligations of corporations organized under Acts of Congress which are instrumentalities of the United States under certain conditions.

26 USC 243 - Dividends received by corporations

(a) General rule 
In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:
(1) 70 percent, in the case of dividends other than dividends described in paragraph (2) or (3);
(2) 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 (15 U.S.C. 661 and following); and
(3) 100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).
(b) Qualifying dividends 

(1) In general 
For purposes of this section, the term qualifying dividend means any dividend received by a corporation
(A) if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and
(B) if
(i) such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, for which an election under section 1562 was not in effect, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group, or
(ii) such dividend is paid by a corporation with respect to which an election under section 936 is in effect for the taxable year in which such dividend is paid.
(2) Affiliated group 
For purposes of this subsection:
(A) In general 
The term affiliated group has the meaning given such term by section 1504 (a), except that for such purposes sections 1504 (b)(2), 1504 (b)(4), and 1504 (c) shall not apply.
(B) Group must be consistent in foreign tax treatment 
The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received
(i) 1 or more members of the affiliated group referred to in paragraph (1)(A) choose to any extent to take the benefits of section 901, and
(ii) 1 or more other members of such group claim to any extent a deduction for taxes otherwise creditable under section 901.
(3) Special rule for groups which include life insurance companies 

(A) In general 
In the case of an affiliated group which includes 1 or more insurance companies under section 801, no dividend by any member of such group shall be treated as a qualifying dividend unless an election under this paragraph is in effect for the taxable year in which the dividend is received. The preceding sentence shall not apply in the case of a dividend described in paragraph (1)(B)(ii).
(B) Effect of election 
If an election under this paragraph is in effect with respect to any affiliated group
(i) part II of subchapter B of chapter 6 (relating to certain controlled corporations) shall be applied with respect to the members of such group without regard to sections 1563 (a)(4) and 1563 (b)(2)(D), and
(ii) for purposes of this subsection, a distribution by any member of such group which is subject to tax under section 801 shall not be treated as a qualifying dividend if such distribution is out of earnings and profits for a taxable year for which an election under this paragraph is not effective and for which such distributing corporation was not a component member of a controlled group of corporations within the meaning of section 1563 solely by reason of section 1563 (b)(2)(D).
(C) Election 
An election under this paragraph shall be made by the common parent of the affiliated group and at such time and in such manner as the Secretary shall by regulations prescribe. Any such election shall be binding on all members of such group and may be revoked only with the consent of the Secretary.
(c) Retention of 80-percent dividends received deduction for dividends from 20-percent owned corporations 

(1) In general 
In the case of any dividend received from a 20-percent owned corporation
(A) subsection (a)(1) of this section, and
(B) subsections (a)(3) and (b)(2) of section 244,

shall be applied by substituting 80 percent for 70 percent.

(2) 20-percent owned corporation 
For purposes of this section, the term 20-percent owned corporation means any corporation if 20 percent or more of the stock of such corporation (by vote and value) is owned by the taxpayer. For purposes of the preceding sentence, stock described in section 1504 (a)(4) shall not be taken into account.
(d) Special rules for certain distributions 
For purposes of subsection (a)
(1) Any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.) shall not be treated as a dividend.
(2) A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.
(3) Any dividend received from a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following) shall not be treated as a dividend.
(4) Any dividend received which is described in section 244 (relating to dividends received on preferred stock of a public utility) shall not be treated as a dividend.
(e) Certain dividends from foreign corporations 
For purposes of subsection (a) and for purposes of section 245, any dividend from a foreign corporation from earnings and profits accumulated by a domestic corporation during a period with respect to which such domestic corporation was subject to taxation under this chapter (or corresponding provisions of prior law) shall be treated as a dividend from a domestic corporation which is subject to taxation under this chapter.

26 USC 244 - Dividends received on certain preferred stock

(a) General rule 
In the case of a corporation, there shall be allowed as a deduction an amount computed as follows:
(1) First determine the amount received as dividends on the preferred stock of a public utility which is subject to taxation under this chapter and with respect to which the deduction provided in section 247 for dividends paid is allowable.
(2) Then multiply the amount determined under paragraph (1) by the fraction
(A) the numerator of which is 14 percent, and
(B) the denominator of which is that percentage which equals the highest rate of tax specified in section 11 (b).
(3) Finally ascertain the amount which is 70 percent of the excess of
(A) the amount determined under paragraph (1), over
(B) the amount determined under paragraph (2).
(b) Exception 
If the dividends described in subsection (a)(1) are qualifying dividends (as defined in section 243 (b)(1), but determined without regard to section 243 (d)(4))
(1) subsection (a) shall be applied separately to such qualifying dividends, and
(2) for purposes of subsection (a)(3), the percentage applicable to such qualifying dividends shall be 100 percent in lieu of 70 percent.

26 USC 245 - Dividends received from certain foreign corporations

(a) Dividends from 10-percent owned foreign corporations 

(1) In general 
In the case of dividends received by a corporation from a qualified 10-percent owned foreign corporation, there shall be allowed as a deduction an amount equal to the percent (specified in section 243 for the taxable year) of the U.S.-source portion of such dividends.
(2) Qualified 10-percent owned foreign corporation 
For purposes of this subsection, the term qualified 10-percent owned foreign corporation means any foreign corporation (other than a passive foreign investment company) if at least 10 percent of the stock of such corporation (by vote and value) is owned by the taxpayer.
(3) U.S.-source portion 
For purposes of this subsection, the U.S.-source portion of any dividend is an amount which bears the same ratio to such dividend as
(A) the post-1986 undistributed U.S. earnings, bears to
(B) the total post-1986 undistributed earnings.
(4) Post-1986 undistributed earnings 
For purposes of this subsection, the term post-1986 undistributed earnings has the meaning given to such term by section 902 (c)(1).
(5) Post-1986 undistributed U.S. earnings 
For purposes of this subsection, the term post-1986 undistributed U.S. earnings means the portion of the post-1986 undistributed earnings which is attributable to
(A) income of the qualified 10-percent owned foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or
(B) any dividend received (directly or through a wholly owned foreign corporation) from a domestic corporation at least 80 percent of the stock of which (by vote and value) is owned (directly or through such wholly owned foreign corporation) by the qualified 10-percent owned foreign corporation.
(6) Special rule 
If the 1st day on which the requirements of paragraph (2) are met with respect to any foreign corporation is in a taxable year of such corporation beginning after December 31, 1986, the post-1986 undistributed earnings and the post-1986 undistributed U.S. earnings of such corporation shall be determined by only taking into account periods beginning on and after the 1st day of the 1st taxable year in which such requirements are met.
(7) Coordination with subsection (b) 
Earnings and profits of any qualified 10-percent owned foreign corporation for any taxable year shall not be taken into account under this subsection if the deduction provided by subsection (b) would be allowable with respect to dividends paid out of such earnings and profits.
(8) Disallowance of foreign tax credit 
No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to the United States-source portion of any dividend received by a corporation from a qualified 10-percent-owned foreign corporation.
(9) Coordination with section 904 
For purposes of section 904, the U.S.-source portion of any dividend received by a corporation from a qualified 10-percent owned foreign corporation shall be treated as from sources in the United States.
(10) Coordination with treaties 
If
(A) any portion of a dividend received by a corporation from a qualified 10-percent-owned foreign corporation would be treated as from sources in the United States under paragraph (9),
(B) under a treaty obligation of the United States (applied without regard to this subsection), such portion would be treated as arising from sources outside the United States, and
(C) the taxpayer chooses the benefits of this paragraph,

this subsection shall not apply to such dividend (but subsections (a), (b), and (c) of section 904 and sections 902, 907, and 960 shall be applied separately with respect to such portion of such dividend).

(11) Coordination with section 1248 
For purposes of this subsection, the term dividend does not include any amount treated as a dividend under section 1248.
(b) Certain dividends received from wholly owned foreign subsidiaries 

(1) In general 
In the case of dividends described in paragraph (2) received from a foreign corporation by a domestic corporation which, for its taxable year in which such dividends are received, owns (directly or indirectly) all of the outstanding stock of such foreign corporation, there shall be allowed as a deduction (in lieu of the deduction provided by subsection (a)) an amount equal to 100 percent of such dividends.
(2) Eligible dividends 
Paragraph (1) shall apply only to dividends which are paid out of the earnings and profits of a foreign corporation for a taxable year during which
(A) all of its outstanding stock is owned (directly or indirectly) by the domestic corporation to which such dividends are paid; and
(B) all of its gross income from all sources is effectively connected with the conduct of a trade or business within the United States.
(3) Exception 
Paragraph (1) shall not apply to any dividends if an election under section 1562 is effective for either
(A) the taxable year of the domestic corporation in which such dividends are received, or
(B) the taxable year of the foreign corporation out of the earnings and profits of which such dividends are paid.
(c) Certain dividends received from FSC 

(1) In general 
In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to
(A) 100 percent of any dividend received from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC, and
(B) 70 percent (80 percent in the case of dividends from a 20-percent owned corporation as defined in section 243(c)(2)) of any dividend received from another corporation which is distributed out of earnings and profits attributable to effectively connected income received or accrued by such other corporation while such other corporation was a FSC.
(2) Exception for certain dividends 
Paragraph (1) shall not apply to any dividend which is distributed out of earnings and profits attributable to foreign trade income which
(A) is section 923 (a)(2) nonexempt income (within the meaning of section 927 (d)(6)), or
(B) would not, but for section 923 (a)(4), be treated as exempt foreign trade income.
(3) No deduction under subsection (a) or (b) 
No deduction shall be allowable under subsection (a) or (b) with respect to any dividend which is distributed out of earnings and profits of a corporation accumulated while such corporation was a FSC.
(4) Definitions 
For purposes of this subsection
(A) Foreign trade income; exempt foreign trade income 
The terms foreign trade income and exempt foreign trade income have the respective meanings given such terms by section 923.
(B) Effectively connected income 
The term effectively connected income means any income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States and is subject to tax under this chapter. Such term shall not include any foreign trade income.
(C) FSC 
The term FSC has the meaning given such term by section 922.
(5) References to prior law 
Any reference in this subsection to section 922, 923, or 927 shall be treated as a reference to such section as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000.

26 USC 246 - Rules applying to deductions for dividends received

(a) Deduction not allowed for dividends from certain corporations 

(1) In general 
The deductions allowed by sections 243, 244, and 245 shall not apply to any dividend from a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers cooperative associations).
(2) Subsection not to apply to certain dividends of Federal Home Loan Banks 

(A) Dividends out of current earnings and profits 
In the case of any dividend paid by any FHLB out of earnings and profits of the FHLB for the taxable year in which such dividend was paid, paragraph (1) shall not apply to that portion of such dividend which bears the same ratio to the total dividend as
(i) the dividends received by the FHLB from the FHLMC during such taxable year, bears to
(ii) the total earnings and profits of the FHLB for such taxable year.
(B) Dividends out of accumulated earnings and profits 
In the case of any dividend which is paid out of any accumulated earnings and profits of any FHLB, paragraph (1) shall not apply to that portion of the dividend which bears the same ratio to the total dividend as
(i) the amount of dividends received by such FHLB from the FHLMC which are out of earnings and profits of the FHLMC
(I) for taxable years ending after December 31, 1984, and
(II) which were not previously treated as distributed under subparagraph (A) or this subparagraph, bears to
(ii) the total accumulated earnings and profits of the FHLB as of the time such dividend is paid.

For purposes of clause (ii), the accumulated earnings and profits of the FHLB as of January 1, 1985, shall be treated as equal to its retained earnings as of such date.

(C) Coordination with section 243 
To the extent that paragraph (1) does not apply to any dividend by reason of subparagraph (A) or (B) of this paragraph, the requirement contained in section 243 (a) that the corporation paying the dividend be subject to taxation under this chapter shall not apply.
(D) Definitions 
For purposes of this paragraph
(i) FHLB The term FHLB means any Federal Home Loan Bank.
(ii) FHLMC The term FHLMC means the Federal Home Loan Mortgage Corporation.
(iii) Taxable year of FHLB The taxable year of an FHLB shall, except as provided in regulations prescribed by the Secretary, be treated as the calendar year.
(iv) Earnings and profits The earnings and profits of any FHLB for any taxable year shall be treated as equal to the sum of
(I) any dividends received by the FHLB from the FHLMC during such taxable year, and
(II) the total earnings and profits (determined without regard to dividends described in subclause (I)) of the FHLB as reported in its annual financial statement prepared in accordance with section 20 of the Federal Home Loan Bank Act (12 U.S.C. 1440).
(b) Limitation on aggregate amount of deductions 

(1) General rule 
Except as provided in paragraph (2), the aggregate amount of the deductions allowed by sections 243 (a)(1), 244 (a), and subsection (a) or (b) of section 245 shall not exceed the percentage determined under paragraph (3) of the taxable income computed without regard to the deductions allowed by sections 172, 199, 243 (a)(1), 244 (a), subsection (a) or (b) of section 245, and 247, without regard to any adjustment under section 1059, and without regard to any capital loss carryback to the taxable year under section 1212 (a)(1).
(2) Effect of net operating loss 
Paragraph (1) shall not apply for any taxable year for which there is a net operating loss (as determined under section 172).
(3) Special rules 
The provisions of paragraph (1) shall be applied
(A) first separately with respect to dividends from 20-percent owned corporations (as defined in section 243 (c)(2)) and the percentage determined under this paragraph shall be 80 percent, and
(B) then separately with respect to dividends not from 20-percent owned corporations and the percentage determined under this paragraph shall be 70 percent and the taxable income shall be reduced by the aggregate amount of dividends from 20-percent owned corporations (as so defined).
(c) Exclusion of certain dividends 

(1) In general 
No deduction shall be allowed under section 243, 244, or 245, in respect of any dividend on any share of stock
(A) which is held by the taxpayer for 45 days or less during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend, or
(B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.
(2) 90-day rule in the case of certain preference dividends 
In the case of stock having preference in dividends, if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days, paragraph (1)(A) shall be applied
(A) by substituting 90 days for 45 days each place it appears, and
(B) by substituting 181-day period for 91-day period.
(3) Determination of holding periods 
For purposes of this subsection, in determining the period for which the taxpayer has held any share of stock
(A) the day of disposition, but not the day of acquisition, shall be taken into account, and
(B) paragraph (3) of section 1223 shall not apply.
(4) Holding period reduced for periods where risk of loss diminished 
The holding periods determined for purposes of this subsection shall be appropriately reduced (in the manner provided in regulations prescribed by the Secretary) for any period (during such periods) in which
(A) the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially identical stock or securities,
(B) the taxpayer is the grantor of an option to buy substantially identical stock or securities, or
(C) under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property.

The preceding sentence shall not apply in the case of any qualified covered call (as defined in section 1092 (c)(4) but without regard to the requirement that gain or loss with respect to the option not be ordinary income or loss), other than a qualified covered call option to which section 1092 (f) applies.

(d) Dividends from a DISC or former DISC 
No deduction shall be allowed under section 243 in respect of a dividend from a corporation which is a DISC or former DISC (as defined in section 992 (a)) to the extent such dividend is paid out of the corporations accumulated DISC income or previously taxed income, or is a deemed distribution pursuant to section 995 (b)(1).
(e) Certain distributions to satisfy requirements 
No deduction shall be allowed under section 243 (a) with respect to a dividend received pursuant to a distribution described in section 936 (h)(4).

26 USC 246A - Dividends received deduction reduced where portfolio stock is debt financed

(a) General rule 
In the case of any dividend on debt-financed portfolio stock, there shall be substituted for the percentage which (but for this subsection) would be used in determining the amount of the deduction allowable under section 243, 244, or 245 (a) a percentage equal to the product of
(1) 70 percent (80 percent in the case of any dividend from a 20-percent owned corporation as defined in section 243 (c)(2)), and
(2) 100 percent minus the average indebtedness percentage.
(b) Section not to apply to dividends for which 100 percent dividends received deduction allowable 
Subsection (a) shall not apply to
(1) qualifying dividends (as defined in section 243 (b) without regard to section 243 (d)(4)), and
(2) dividends received by a small business investment company operating under the Small Business Investment Act of 1958.
(c) Debt financed portfolio stock 
For purposes of this section
(1) In general 
The term debt financed portfolio stock means any portfolio stock if at some time during the base period there is portfolio indebtedness with respect to such stock.
(2) Portfolio stock 
The term portfolio stock means any stock of a corporation unless
(A) as of the beginning of the ex-dividend date, the taxpayer owns stock of such corporation
(i) possessing at least 50 percent of the total voting power of the stock of such corporation, and
(ii) having a value equal to at least 50 percent of the total value of the stock of such corporation, or
(B) as of the beginning of the ex-dividend date
(i) the taxpayer owns stock of such corporation which would meet the requirements of subparagraph (A) if 20 percent were substituted for 50 percent each place it appears in such subparagraph, and
(ii) stock meeting the requirements of subparagraph (A) is owned by 5 or fewer corporate shareholders.
(3) Special rule for stock in a bank or bank holding company 

(A) In general 
If, as of the beginning of the ex-dividend date, the taxpayer owns stock of any bank or bank holding company having a value equal to at least 80 percent of the total value of the stock of such bank or bank holding company, for purposes of paragraph (2)(A)(i), the taxpayer shall be treated as owning any stock of such bank or bank holding company which the taxpayer has an option to acquire.
(B) Definitions 
For purposes of subparagraph (A)
(i) Bank The term bank has the meaning given such term by section 581.
(ii) Bank holding company The term bank holding company means a bank holding company (within the meaning of section 2(a) of the Bank Holding Company Act of 1956).
(4) Treatment of certain preferred stock 
For purposes of determining whether the requirements of subparagraph (A) or (B) of paragraph (2) or of subparagraph (A) of paragraph (3) are met, stock described in section 1504 (a)(4) shall not be taken into account.
(d) Average indebtedness percentage 
For purposes of this section
(1) In general 
Except as provided in paragraph (2), the term average indebtedness percentage means the percentage obtained by dividing
(A) the average amount (determined under regulations prescribed by the Secretary) of the portfolio indebtedness with respect to the stock during the base period, by
(B) the average amount (determined under regulations prescribed by the Secretary) of the adjusted basis of the stock during the base period.
(2) Special rule where stock not held throughout base period 
In the case of any stock which was not held by the taxpayer throughout the base period, paragraph (1) shall be applied as if the base period consisted only of that portion of the base period during which the stock was held by the taxpayer.
(3) Portfolio indebtedness 

(A) In general 
The term portfolio indebtedness means any indebtedness directly attributable to investment in the portfolio stock.
(B) Certain amounts received from short sale treated as indebtedness 
For purposes of subparagraph (A), any amount received from a short sale shall be treated as indebtedness for the period beginning on the day on which such amount is received and ending on the day the short sale is closed.
(4) Base period 
The term base period means, with respect to any dividend, the shorter of
(A) the period beginning on the ex-dividend date for the most recent previous dividend on the stock and ending on the day before the ex-dividend date for the dividend involved, or
(B) the 1-year period ending on the day before the ex-dividend date for the dividend involved.
(e) Reduction in dividends received deduction not to exceed allocable interest 
Under regulations prescribed by the Secretary, any reduction under this section in the amount allowable as a deduction under section 243, 244, or 245 with respect to any dividend shall not exceed the amount of any interest deduction (including any deductible short sale expense) allocable to such dividend.
(f) Regulations 
The regulations prescribed for purposes of this section under section 7701 (f) shall include regulations providing for the disallowance of interest deductions or other appropriate treatment (in lieu of reducing the dividend received deduction) where the obligor of the indebtedness is a person other than the person receiving the dividend.

26 USC 247 - Dividends paid on certain preferred stock of public utilities

(a) Amount of deduction 
In the case of a public utility, there shall be allowed as a deduction an amount computed as follows:
(1) First determine the amount which is the lesser of
(A) the amount of dividends paid during the taxable year on its preferred stock, or
(B) the taxable income for the taxable year (computed without the deduction allowed by this section).
(2) Then multiply the amount determined under paragraph (1) by the fraction
(A) the numerator of which is 14 percent, and
(B) the denominator of which is that percentage which equals the highest rate of tax specified in section 11 (b).

For purposes of the deduction provided in this section, the amount of dividends paid shall not include any amount distributed in the current taxable year with respect to dividends unpaid and accumulated in any taxable year ending before October 1, 1942. Amounts distributed in the current taxable year with respect to dividends unpaid and accumulated for a prior taxable year shall for purposes of this subsection be deemed to be distributed with respect to the earliest year or years for which there are dividends unpaid and accumulated.

(b) Definitions 
For purposes of this section and section 244
(1) Public utility 
The term public utility means a corporation engaged in the furnishing of telephone service or in the sale of electrical energy, gas, or water, if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof or by an agency or instrumentality of the United States or by a public utility or public service commission or other similar body of the District of Columbia or of any State or political subdivision thereof.
(2) Preferred stock 

(A) In general 
The term preferred stock means stock issued before October 1, 1942, which during the whole of the taxable year (or the part of the taxable year after its issue) was stock the dividends in respect of which were cumulative, limited to the same amount, and payable in preference to the payment of dividends on other stock.
(B) Certain stock issued on or after October 1, 1942 
Stock issued on or after October 1, 1942, shall be deemed for purposes of this paragraph to have been issued before October 1, 1942, if it was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock (including stock which is preferred stock by reason of this subparagraph or subparagraph (D)), but only to the extent that the par or stated value of the new stock does not exceed the par, stated, or face value of the bonds or debentures issued before October 1, 1942, or the other preferred stock, which such new stock is issued to refund or replace.
(C) Determination under regulations 
The determination of whether stock was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock, shall be made under regulations prescribed by the Secretary.
(D) Issuance of stock 
For purposes of subparagraph (B), issuance of stock includes issuance either by the same or another corporation in a transaction which is a reorganization (as defined in section 368 (a)) or a transaction subject to part VI of subchapter O as in effect before its repeal (relating to exchanges in SEC obedience orders), or the respectively corresponding provisions of the Internal Revenue Code of 1939.

26 USC 248 - Organizational expenditures

(a) Election to deduct 
If a corporation elects the application of this subsection (in accordance with regulations prescribed by the Secretary) with respect to any organizational expenditures
(1) the corporation shall be allowed a deduction for the taxable year in which the corporation begins business in an amount equal to the lesser of
(A) the amount of organizational expenditures with respect to the taxpayer, or
(B) $5,000, reduced (but not below zero) by the amount by which such organizational expenditures exceed $50,000, and
(2) the remainder of such organizational expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the corporation begins business.
(b) Organizational expenditures defined 
The term organizational expenditures means any expenditure which
(1) is incident to the creation of the corporation;
(2) is chargeable to capital account; and
(3) is of a character which, if expended incident to the creation of a corporation having a limited life, would be amortizable over such life.
(c) Time for and scope of election 
The election provided by subsection (a) may be made for any taxable year beginning after December 31, 1953, but only if made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). The period so elected shall be adhered to in computing the taxable income of the corporation for the taxable year for which the election is made and all subsequent taxable years. The election shall apply only with respect to expenditures paid or incurred on or after August 16, 1954.

26 USC 249 - Limitation on deduction of bond premium on repurchase

(a) General rule 
No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in control of, or controlled by, the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Secretary that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature.
(b) Special rules 
For purposes of subsection (a)
(1) Adjusted issue price 
The adjusted issue price is the issue price (as defined in sections 1273 (b) and 1274) increased by any amount of discount deducted before repurchase, or, in the case of bonds or other evidences of indebtedness issued after February 28, 1913, decreased by any amount of premium included in gross income before repurchase by the issuing corporation.
(2) Control 
The term control has the meaning assigned to such term by section 368 (c).

26 USC 250 - Repealed. Pub. L. 101508, title XI, 11801(a)(15), Nov. 5, 1990, 104 Stat. 1388520]

Section, added Pub. L. 91–518, title IX, § 901(a), Oct. 30, 1970, 84 Stat. 1341; amended Pub. L. 93–496, § 12, Oct. 28, 1974, 88 Stat. 1531; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–473, § 2(a)(2)(C), Oct. 17, 1978, 92 Stat. 1464; Pub. L. 96–454, § 3(b)(1), Oct. 15, 1980, 94 Stat. 2012; Pub. L. 97–261, § 6(d)(3), Sept. 20, 1982, 96 Stat. 1107; Pub. L. 99–521, § 4(3), Oct. 22, 1986, 100 Stat. 2993, related to certain payments to National Railroad Passenger Corporation.