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(C) if the spouse of the taxpayer has attained the age of 65 before the close of the taxable year and is disabled, amounts paid by the taxpayer during the taxable year for the medical care of his spouse shall be taken into account only to the extent that such amounts do not exceed $15,000.

(3) MeanING OF DISABLED.-For purposes of paragraph (1), an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary or his delegate may require.

(4) DETERMINATION OF STATUS.-For purposes of paragraph (1), the determination as to whether the taxpayer or his spouse is disabled shall be made as of the close of the taxable year of the taxpayer, except that if his spouse dies during such taxable year such determination shall be made with respect to his spouse as of the

time of such death. SEC. 214. EXPENSES FOR CARE OF CERTAIN DEPENDENTS

(a) GENERAL RULE.—There shall be allowed as a deduction expenses paid during the taxable year by a taxpayer who is a woman or a widower for the care of one or more dependents (as defined in subsection (c) (1)), but only if such care is for the purpose of enabling the taxpayer to be gainfully employed. (b) LIMITATIONS. (1) IN GENERAL.-The deduction under subsection (a)

(A) shall not exceed $600 for any taxable year; and

(B) shall not apply to any amount paid to an individual with respect to whom the taxpayer is allowed for his taxable year a deduction under section 15i (relating to deductions for personal exemptions).

(2) WORKING WIVES. - In the case of a woman who is married, the deduction under subsection (a)

(A) shall not be allowed unless she files a joint return with her husband for the taxable year, and

(B) shall be reduced by the amount (if any) by which the adjusted gross income of the taxpayer and her spouse exceeds

$4,500. This paragraph shall not apply if the taxpayer's husband is incapable of self-support because mentally or physically defective. (c) DEFINITIONS.—For purposes of this section

(1) DEPENDENT.-The term "dependent” means a person with respect to whom the taxpayer is entitled to an exemption under section 151 (e) (1)

(A) who has not attained the age of 12 years and who (within the meaning of section 152) is a son, stepson, daughter, or stepdaughter of the taxpayer; or

(B) who is physically or mentally incapable of caring for himself.

(2) WIDOWER.—The term "widower" includes an unmarried individual who is legally separated from his spouse under a decree of divorce or of separate maintenance.

(3) DETERMINATION OF STATUS.-A woman shall not be considered as married if she is legally separated from her spouse under à decree of divorce or of separate maintenance at the close of the

taxable year

SEC. 215. ALIMONY, ETC., PAYMENTS.

(a) GENERAL RULE.- In the case of a husband described in section 71, there shall be allowed as a deduction amounts includible under section 71 in the gross income of his wife, payment of which is made within the husband's taxable year. No deduction shall be allowed under the preceding sentence with respect to any payment if, by reason of section 71 (d) or 682, the amount thereof is not includible in the husband's gross income. (b) CROSS REFERENCE.-

For definitions of “husband” and “wife", see section 7701 (a) (17). SEC. 216. AMOUNTS REPRESENTING TAXES AND INTEREST PAID TO

COOPERATIVE HOUSING CORPORATION. (a) ALLOWANCE OF DEDUCTION.- In the case of a tenant-stockholder (as defined in subsection (b) (2)), there shall be allowed as a deduction amounts (not otherwise deductible) paid or accrued to a cooperative housing corporation within the taxable year, but only to the extent that such amounts represent the tenant-stockholder's proportionate share of

(1) the real estate taxes allowable as a deduction to the corporation under section 164 which are paid or incurred by the corporation on the houses or apartment building and on the land on which such houses (or building) are situated, or

(2) the interest allowable as a deduction to the corporation under section 163 which is paid or incurred by the corporation on its indebtedness contracted

(A) in the acquisition, construction, alteration, rehabilitation, or maintenance of the houses or apartment building, or

(B) in the acquisition of the land on which the houses (or apartment building) are situated. (b) DEFINITIONS.-For purposes of this section

(1) COOPERATIVE HOUSING CORPORATION.— The term "cooperative housing corporation” means a corporation

(A) having one and only one class of stock outstanding,

(B) each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation,

(C) no stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except on a complete or partial liquidation of the corporation, and

(D) 80 percent or more of the gross income of which for the taxable year in which the taxes and interest described in subsection (a) are paid or incurred is derived from tenantstockholders.

(2) TENANT-STOCKHOLDER:- The term "tenant-stockholder" means an individual who is a stockholder in a cooperative housing corporation, and whose stock is fully paid-up in an amount not less than an amount shown to the satisfaction of the Secretary or his delegate as bearing a reasonable relationship to the portion of the value of the corporation's equity in the houses or apartment building and the land on which situated which is attributable to the house or apartment which such individual is entitled to occupy.

(3) The term "tenant-stockholder's proportionate share” means that proportion which the stock of the cooperative housing corporation owned by the tenant-stockholder is of the total outstanding stock of the corporation (including any stock held by the corpo

ration). SEC. 217. CROSS REFERENCES.

(1) For deduction for long-term capital gains in the case of a taxpayer other than a corporation, see section 1202.

(2) For deductions in respect of a decedent, see section 691.

PART VIII-SPECIAL DEDUCTIONS FOR CORPORATIONS

Sec. 241. Allowance of special deductions
Sec. 242. Partially tax-exempt interest.
Sec. 243. Dividends received by corporations.
Sec. 244. Dividends received on certain preferred stock.
Sec. 245. Dividends received from certain foreign corporations.
Sec. 246. Rules applying to deductions for dividends received.
Sec. 247. Dividends paid on certain preferred stock of public utili-

ties.
Sec. 248. Organizational expenditures.

SEC. 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. SEC. 242. PARTIALLY TAX-EXEMPT INTEREST.

(a) ALLOWANCE OF DEDUCTION.—There shall be allowed to a corporation as a deduction the amount received as interest on obligations of the United States or on obligations of corporations organized under Act of Congress which are instrumentalities of the United States, but only if

(1) such interest is included in gross income; and

(2) such interest is exempt from normal tax under the Act authorizing the issuance of such obligations. (b) CROSS REFERENCE.

For reduction of deduction under subsection (a) on account of amor.

tizable bond premium, see section 171. SEC. 243. DIVIDENDS RECEIVED BY CORPORATIONS.

(a) GENERAL RULE.--In the case of a corporation (other than a small business investment company operating under the Small Business Investment Act of 1958) there shall be allowed as a deduction an amount equal to 85 percent of the amount received as dividends (other than dividends described in paragraph (1) of section 244, relating to dividends on the preferred stock of a public utility) from a domestic corporation which is subject to taxation under this chapter.

(b) SMALL BUSINESS INVESTMENT COMPANIES.-In the case of a small business investment company operating under the Small Business Investment Act of 1958, there shall be allowed as a deduction an

amount equal to 100 percent of the amount received as dividends (other than dividends described in paragraph (1) of section 244, relating to dividends on preferred stock of a public utility) from a domestic corporation which is subject to taxation under this chapter.

(c) SPECIAL RULES FOR CERTAIN DISTRIBUTIONS.-For purposes of subsections (a) and (b)

(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 (sec. 856 and following) shall not be treated as a dividend.

(d) CERTAIN DIVIDENDS From FOREIGN CORPORATIONS.—For purposes of subsections (a) and (b) of this section 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. SEC. 244. DIVIDENDS RECEIVED ON CERTAIN PREFERRED STOCK.

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 sum of the normal tax rate and the surtax rate for the taxable year prescribed by section 11.

(3) Finally ascertain the amount which is 85 percent of the excess of

(A) the amount determined under paragraph (1), over

B) the amount determined under paragraph (2). SEC. 245. DIVIDENDS RECEIVED FROM CERTAIN FOREIGN CORPO.

RATIONS. In the case of dividends received from a foreign corporation (other than a foreign personal holding company) which is subject to taxation under this chapter, if, for an uninterrupted period of not less than 36 months ending with the close of such foreign corporation's taxable year in which such dividends are paid (or, if the corporation has not been in existence for 36 months at the close of such taxable year, for the period the foreign corporation has been in existence as of the close of such taxable year) such foreign corporation has been engaged in trade or business within the United States and has derived 50 percent or more of its gross income from sources within the United States, there shall be allowed as a deduction in the case of a corporation

(1) An amount equal to the percent (specified in section 243 for the taxable year) of the dividends received out of its earnings and profits specified in paragraph (2) of the first sentence of section 316 (a), but such amount shall not exceed an amount which bears the same ratio to such percent of such dividends received out of such earnings and profits as the gross income of such foreign corporation for the taxable year from sources within the United States bears to its gross income from all sources for such taxable year, and

(2) An amount equal to the percent (specified in section 243 for the taxable year) of the dividends received out of that part of its earnings and profits specified in paragraph (1) of the first sentence of section 316 (a) accumulated after the beginning of such uninterrupted period, but such amount shall not exceed an amount which bears the same ratio to such percent of such dividends received out of such accumulated earnings and profits as the gross income of such foreign corporation from sources within the United States for the portion of such uninterrupted period ending at the beginning of such taxable year bears to its gross income from all sources for

such portion of such uninterrupted period. SEC. 246. RULES APPLYING TO DEDUCTIONS FOR DIVIDENDS RE.

CEIVED. (a) DEDUCTION NOT ALLOWED FOR DIVIDENDS FROM CERTAIN CORPORATIONS.—The deductions allowed by sections 243, 244, and 245 shall not apply to any dividend from

(1) a corporation organized under the China Trade Act, 1922 (see sec. 941); or

(2) 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) a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers' cooperative associations); or

(B) a corporation to which section 931 (relating to income from sources within possessions of the United States) applies. (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), 244, and 245 shall not exceed 85 percent of the taxable income computed without regard to the deductions allowed by sections 172, 243 (a), 244, 245, and 247.

(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). (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 sold or otherwise disposed of in any case in which the taxpayer has held such share for 15 days or less, or

(B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make corre

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