Taxable Years Sec. 132 (e) of said Act tion, which begins in 1936 or 1937, tion, which begins in 1936 or 1937, the adjusted net income shall be the adjusted net income shall be the adjusted net income as defined the adjusted net income as defined in section 14 of the Revenue Act of in section 14 of the Revenue Aet 1936, and the basic surtax credit of 1936, and the basie surtax shall be only the dividends paid credit shall be only the dividends eredit computed under the Revenue paid credit computed under the Act of 1936 without the benefit of Revenue Act of 1936 without the the dividend carry over provided benefit of the dividend carry over in section 27 (b) of such Act. In provided in section 27 (b) of such the case of a preceding taxable Act. In the ease of a preceding year, referred to in this subsection, taxable year, referred to in this which begins in 1938, the adjusted subsection, which begins in 1938, net income shall be the adjusted net the adjusted net income shall be income as defined in section 13 (a) the adjusted net income as defined of the Revenue Act of 1938, 52 in section 14 of the Revenue Aet Stat. 455, and the basie surtax of 1938, 52 Stat. 455, and the basie eredit shall be the basie surtax surtax credit shall be the basic sur eredit as defined in section 27 of the tax credit as defined in section 27 Revenue Act of 1938, 52 Stat. 468. of the Revenue Act of 1938, 52 Stat. 468. Sec. 27 (c), I. R. C., supra, amended by Sec. 132 (c) R. A. of 1942, by omitting language type and adding language in italics. Sec. 132 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939, but also applicable in the computations with respect to previous taxable years for the purpose of ascertaining the amount of dividend carry-over from such previous taxable years. in stricken through For prior amendments of Sec. 27 (c), supra, see Sec. 27 (c) in 1939 column. Sec. 27. (d) Dividends in kind. Sec. 27. (d) Dividends in kind. Sec. 27. (d) Dividends in kind. -If a dividend is paid in property -If a dividend is paid in property —If a dividend is paid in property other than money (including stock other than money (including stock other than money (including stock of the corporation if held by the of the corporation if held by the of the corporation if held by the corporation as an investment) the corporation as an investment) the corporation as an investment) the amount with respect thereto which amount with respect thereto which amount with respect thereto which shall be used in computing the shall be used in computing the shall be used in computing the basic surtax credit shall be the ad- basic surtax credit shall be the ad- basic surtax credit shall be the adjusted basis of the property in the justed basis of the property in the justed basis of the property in the hands of the corporation at the hands of the corporation at the hands of the corporation at the time of the payment, or the fair time of the payment, or the fair time of the payment, or the fair market value of the property at market value of the property at market value of the property at the time of the payment, which- the time of the payment, which- the time of the payment, whichever is the lower. ever is the lower. ever is the lower. Sec. 27. (e) Dividends in obliga- Sec. 27. (e) Dividends in obliga- Sec. 27. (e) Dividends in obligations of the corporation.-If a div- tions of the corporation.-If a div- tions of the corporation.-If a dividend is paid in obligations of the idend is paid in obligations of the idend is paid in obligations of the corporation, the amount with re- corporation, the amount with re- corporation, the amount with respect thereto which shall be used spect thereto which shall be used spect thereto which shall be used in computing the basic surtax in computing the basic surtax in computing the basic surtax credit shall be the face value of credit shall be the face value of credit shall be the face value of the obligations, or their fair mar- the obligations, or their fair mar- the obligations, or their fair market value at the time of the pay- ket value at the time of the pay- ket value at the time of the payment, whichever is the lower. If ment, whichever is the lower. If ment, whichever is the lower. If the fair market value of any such the fair market value of any such the fair market value of any such dividend paid in any taxable year dividend paid in any taxable year dividend paid in any taxable year of the corporation beginning after of the corporation beginning after of the corporation beginning after tion, which begins in 1936 or 1937, Revenue Act of 1936 without the Sec. 27 (c), I. R. C., supra, amended by Sec. 132 (c) R. A. of 1942, by omitting language in stricken through type and adding language in italics. Sec. 132 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939, but also applicable in the computations with respect to previous taxable years for the purpose of ascertaining the amount of dividend carryover from such previous taxable years. For prior amendments of Sec. 27 (c), supra, see explanation under Sec. 27 (c) in 1939 column. the adjusted net income as defined Sec. 27 (c), I. R. C., supra, amended by H. J. Res. 60 of March 17, 1941 by adding language in italics. Sec. 2 of said H. J. Res. 60 provides that the amendment shall have the same effect as if such section, so amended, had been enacted in the I. R. C. on Feb. 10, 1939. Sec. 27. (d) Dividends in kind. Sec. 27. (d) Dividends in kind. -If a dividend is paid in property -If a dividend is paid in property other than money (including stock other than money (including stock of the corporation if held by the of the corporation if held by the corporation as an investment) the corporation as an investment) the amount with respect thereto which amount with respect thereto which shall be used in computing the shall be used in computing the basic surtax credit shall be the ad- basic surtax credit shall be the adjusted basis of the property in the justed basis of the property in the hands of the corporation at the hands of the corporation at the time of the payment, or the fair time of the payment, or the fair market value of the property at market value of the property at the the time of the payment, which- time of the payment, whichever is ever is the lower. the lower. Sec. 27. (e) Dividends in obliga- Sec. 27. (e) Dividends in obligations of the corporation.-If a div- tions of the corporation.-If a dividend is paid in obligations of the idend is paid in obligations of the corporation, the amount with re- corporation, the amount with respect thereto which shall be used spect thereto which shall be used in computing the basic basic surtax in computing the basic surtax credit shall be the face value of credit shall be the face value of the obligations, or their fair mar- the obligations, or their fair market value at the time of the pay- ket value at the time of the payment, whichever is the lower. If ment, whichever is the lower. If the fair market value of any such the fair market value of any such dividend paid in any taxable year dividend paid in any taxable year of the corporation beginning after of the corporation beginning after Taxable Years December 31, 1935, is lower than the face value, then when the obligation is redeemed by the corporation the excess of the amount for which redeemed over the fair market value at the time of the dividend payment (to the extent not allowable as a deduction in computing net income for any taxable year) shall be treated as a dividend paid in the taxable year in which the redemption occurs. December 31, 1935, is lower than December 31, 1935, is lower than a Sec. 27. (f) Taxable stock divi- Sec. 27. (f) Taxable stock divi- Sec. 27. (f) Taxable stock dividends. In case of a stock divi- dends.-In case of a stock divi- dends.-In case of a stock dividend or stock right which is a dend or stock right which is a dend or stock right which is taxable dividend in the hands of taxable dividend in the hands of taxable dividend in the hands of shareholders under section 115 (f), shareholders under section 115 (f), shareholders under section 115 (f), the amount with respect thereto which shall be used in computing the basic surtax credit shall be the fair market value of the stock or the stock right at the time of the payment. the amount with respect thereto the amount with respect thereto which shall be used in computing the basic surtax credit shall be the fair market value of the stock or the stock right at the time of the payment. of purposes of computing the basic surtax credit under this section, be treated as a taxable dividend paid. Sec. 27. (g) Distributions in Sec. 27. (g) Distributions in Sec. 27. (g) Distributions in liquidation.-In the case of liquidation.-In the case of liquidation.-In the case amounts distributed in liquidation amounts distributed in liquidation amounts distributed in liquidation the part of such distribution which the part of such distribution which the part of such distribution which is properly chargeable to the earn- is properly chargeable to the earn-is properly chargeable to the earnings or profits accumulated after ings or profits accumulated after ings or profits accumulated after February 28, 1913, shall, for the February 28, 1913, shall, for the February 28, 1913, shall, for the purposes of computing the basic purposes of computing the basic surtax credit under this section, be surtax credit under this section, be treated as a taxable dividend paid. treated as a taxable dividend paid. Sec. 27. (h) Preferential divi- Sec. 27. (h) Preferential divi- Sec. 27. (h) Preferential dividends. The amount of any dis- dends.-The amount of any dis- dends. The amount of any distribution (although each portion tribution (although each portion tribution (although each portion thereof is received by a share- thereof is received by a share- thereof is received by a shareholder as a taxable dividend), not holder as a taxable dividend), not holder as a taxable dividend), not made in connection with a consent made in connection with a consent made in connection with a consent distribution (as defined in section distribution (as defined in section distribution (as defined in section 28 (a) (4)), shall not be consid- 28 (a) (4)), shall not be consid- 28 (a) (4)), shall not be considered as dividends paid for the pur- ered as dividends paid for the pur- ered as dividends paid for the purpose of computing the basic surtax pose of computing the basic surtax pose of computing the basic surtax credit, unless such distribution is credit, unless such distribution is credit, unless. such distribution is pro rata, with no preference to any pro rata, with no preference to any pro rata, with no preference to any share of stock as compared with share of stock as compared with share of stock as compared with other shares of the same class, and other shares of the same class, and other shares of the same class, and with no preference to one class of with no preference to one class of with no preference to one class of stock as compared with another stock as compared with another stock as compared with another class except to the extent that the class except to the extent that the former is entitled (without referformer is entitled (without reference to waivers of their rights by ence to waivers of their rights by shareholders) to such preference. shareholders) to such preference. For a distribution made in connection with a consent distribution, see section 28. class except to the extent that the For a distribution made in For a distribution made in connection with a consent distribution, see section 28. Sec. 27. (i) Nontaxable distri- Sec. 27. (i) Nontaxable distri- Sec. 27. (i) Nontaxable distributions. If any part of a dis-butions.-If any part of a dis-butions. If any part of a distribution (including stock divi- tribution (including stock divi- tribution (including stock dividends and stock rights) is not a dends and stock rights) is not a dends and stock rights) is not a taxable dividend in the hands of taxable dividend in the hands of taxable dividend in the hands of December 31, 1935, is lower than December 31, 1935, is lower than the face value, then when the obligation is redeemed by the corporation the excess of the amount for which redeemed over the fair market value at the time of the dividend payment (to the extent not allowable as a deduction in computing net income for any taxable year) shall be treated as a dividend paid in the taxable year in which the redemption occurs. the face value, then when the obli- Taxable Years Sec. 27. (f) Taxable stock divi See p. 80, Eighth Edition. Sec. 27. (f) Taxable stock divi- Sec. 27. (f) Taxable stock dividends. In case of a stock divi- dends.-In case of a stock dividends. dend or stock right which is a dend or stock right which is a taxable dividend in the hands of taxable dividend in the hands of shareholders under section 115 (f), shareholders under section 115 (f), the amount with respect thereto which shall be used in computing the basic surtax credit shall be the fair market value of the stock or the stock right at the time of the payment. the amount with respect thereto Sec. 27. (g) Distributions in See p. 80, Eighth Edition. Sec. 27. (g) Distributions in Sec. 27. (g) Distributions in liquidation. In the case of liquidation.-In the case of amounts liquidation. amounts distributed in liquidation distributed in liquidation the the part of such distribution which part of such distribution which is properly chargeable to the earn- is properly chargeable to the earnings or profits accumulated after ings or profits accumulated after February 28, 1913, shall, for the February 28, 1913, shall, for the purposes of computing the basic purposes of computing the basic surtax credit under this section, be surtax credit under this section, be treated as a taxable dividend paid. treated as a taxable dividend paid. Sec. 27. (h) Preferential divi See p. 80, Eighth Edition. Sec. 27. (h) Preferential divi- Sec. 27. (h) Preferential dividends. The amount of any dis- dends.-The amount of any dis- dends. tribution (although each portion tribution (although each portion thereof is received by a share- thereof is received by a shareholder as a taxable dividend), not holder as a taxable dividend), not made in connection with a consent made in connection with a consent distribution (as defined in section distribution (as defined in section 28 (a) (4)), shall not be consid-28 (a) (4)), shall not be considered ered as dividends paid for the pur- as dividends paid for the purpose pose of computing the basic surtax of computing the basic surtax credit, unless such distribution is pro rata, with no preference to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another class except to the extent that the former is entitled (without reference to waivers of their rights by shareholders) to such preference. For a distribution made in connection with a consent distribution, see section 28. credit, unless such distribution is For a distribution made in Sec. 27. (i) Nontaxable distri- Sec. 27. (i) Nontaxable distributions. If any part of a dis-butions.-If any part of a distribution (including stock (including stock divi- tribution (including stock dividends and stock rights) is not a dends and stock rights) is not a taxable dividend in the hands of taxable dividend in the hands of Sec. 27. (i) Nontaxable distributions. See p. 82, Eighth Edition. Taxable Years Taxable Years Taxable Years such of the shareholders as are such of the shareholders as are such of the shareholders as are subject to taxation under this subject to taxation under this subject to taxation under this chapter for the period in which chapter for the period in which chapter for the period in which the distribution is made, such part the distribution is made, such part the distribution is made, such part shall not be included in computing shall not be included in computing shall not be included in computing the basic surtax credit. the basic surtax credit. the basic surtax credit. Sec. credit. 28. Consent dividends Sec. 28. Consent dividends Sec. 28. Consent dividends Sec. 28. (a) Definitions.-As used in this section Sec. 28. (a) Definitions.-As used in this section Sec. 28. (a) Definitions.-As used in this section Sec. 28. (a) (1) Consent stock. Sec. 28. (a) (1) Consent stock. Sec. 28. (a) (1) Consent stock. -The term "consent stock" means -The term "consent stock" means-The term "consent stock" means the class or classes of stock en- the class or classes of stock en- the class or classes of stock entitled, after the payment of pre- titled, after the payment of pre- titled, after the payment of preferred dividends (as defined in ferred dividends (as defined in ferred dividends (as defined in paragraph (2)), to a share in the paragraph (2)), to a share in the paragraph (2)), to a share in the distribution (other than in com- distribution (other than in com- distribution (other than in complete or partial liquidation) with- plete or partial liquidation) with- plete or partial liquidation) within the taxable year of all the re- in the taxable year of all the re- in the taxable year of all the remaining earnings or profits, which maining earnings or profits, which maining earnings or profits, which share constitutes the same propor- share constitutes the same propor-share constitutes the same proportion of such distribution regardless tion of such distribution regardless tion of such distribution regardless of the amount of such distribution. of the amount of such distribution. of the amount of such distribution. Sec. 28. (a) (2) Preferred divi- Sec. 28. (a) (2) Preferred divi- Sec. 28. (a) (2) Preferred dividends. The term "preferred div- dends. The term "preferred diy- dends.-The term "preferred dividends" means a distribution idends" means a distribution idends" means a distribution (other than in complete or partial (other than in complete or partial (other than in complete or partial liquidation), limited in amount, liquidation), limited in amount, 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 or profits may be made within the taxable year. which must be made on any class which must be made on any class of stock before a further distribution (other than in complete or partial liquidation) of earnings or profits may be made within the taxable year. Sec. 28. (a) (3) Consent divi- Sec. 28. (a) (3) Consent diviSec. 28. (a) (3) Consent dividends day. The term "consent div- dends day. The term "consent div-dends day. The term "consent dividends day" means the last day of idends day" means the last day of idends day" means the last day of the taxable year of the corporation, the taxable year of the corporation, the taxable year of the corporation, unless during the last month of unless during the last month of unless during the last month of such year there have occurred one such year there have occurred one such year there have occurred one or more days on which was pay- or more days on which was pay- or more days on which was payable a partial distribution (as de- able a partial distribution (as de-able a partial distribution (as defined in paragraph (5)), in which fined in paragraph (5)), in which fined in paragraph (5)), in which case it means the last of such days. case it means the last of such days. case it means the last of such days. Sec. 28. (a) (4) Consent distri- Sec. 28. (a) (4) Consent distri- Sec. 28. (a) (4) Consent distribution. The term "consent distribution.-The term "consent distribution.-The term "consent distribution" the means distribution bution" means the distribution bution" means the distribution which would have been made if on which would have been made if on which would have been made if on the consent dividends day (as defined in paragraph (3)) there had actually been distributed in cash and received by each shareholder making a consent filed by the corporation under subsection (d), the specific amount stated in such consent. the consent dividends day (as de- the consent dividends day (as defined in paragraph (3)) there had actually been distributed in cash and received by each shareholder making a consent filed by the corporation under subsection (d), the specific amount stated in such consent. Sec. 28. (a) (5) Partial distri- Sec. 28. (a) (5) Partial distri- Sec. 28. (a) (5) Partial distribution. The term "partial distribution. The term "partial distribution.-The term "partial distribution" means such part of an ac-bution" means such part of an ac-bution" means such part of an ac |