PUBLIC LAWS-CH. 289 -MAY 28, 1938 (B) There shall be included in computing gross income the amount of interest received which is wholly exempt from the taxes imposed by this title, decreased by the amount of interest paid or accrued which is not allowed as a deduc- tion by section 23 (b), relating to interest on indebtedness incurred or continued to purchase or carry certain tax- exempt obligations. B" antilitas. (d) BANK AFFILrATEs.- In the case of a holding company affiliate Stat.as defined in section 2 of the Banking Act of 1933), the amount of the earnings or profits which the Board of Governors of the Federal Reserve System certifies to the Commissioner has been devoted by such affiliate during the taxable year to the acquisition of readily u 5 CC§ 61. marketable assets other than bank stock in compliance with section Aggregate of allow- 5144 of the Revised Statutes. The aggregate of the credits allowable l cdits under this subsection for all taxable years beginning after December 31, 1935, shall not exceed the amount required to be devoted under such section 5144 to such purposes, and the amount of the credit for any taxable year shall not exceed the adjusted net income for such year. Dividends paid (e) DIVIDENwD PAID CREDIT.- For corporation dividends paid credit, see section 27. Consent dividends (f) CONsENT DIVIDENDs CREDrr. -For corporation consent dividends Post, p. 470. credit, see section 28. Corporation divi- dends paid credit. Definition in gen- eral. "Dividends paid credit" defined. "Indebtedness" de- fined. "Basic surtax cred- it" defined. SEC. 27. CORPORATION DIVIDENDS PAID CREDIT. (a) DEFINITION IN GENERAL.- As used in this title with respect to any taxable year the term "dividends paid credit" means the sum of: (1) The basic surtax credit for such year, computed as pro- vided in subsection (b); (2) The dividend carry-over to such year, computed as pro- vided in subsection (c); (3) The amount, if any, by which any deficit in the accumulated earnings and profits, as of the close of the preceding taxable year (whether beginning on before, or after January 1, 1938), exceeds the amount of the credit provided in section 26 (c) (relating to net operating losses), for such preceding taxable year (if begin- ning after December 31, 1937); and (4) Amounts used or irrevocably set aside to pay or to retire indebtedness of any kind, if such amounts are reasonable with respect to the size and terms of such indebtedness. As used in this paragraph the term "indebtedness" means only an indebted- ness of the corporation existing at the close of business on Decem- ber 31, 1937, and evidenced by a bond, note, debenture, certificate of indebtedness, mortgage, or deed of trust, issued by the cor- poration and in existence at the close of business on December 31, 1937, or by a bill of exchange accepted by the corporation prior to, and in existence at, the close of business on such date. Where the indebtedness is for a principal sum, with interest, no credit shall be allowed under this paragraph for amounts used or set aside to pay such interest. (b) BASIC SURTAX CREDrT.- As used in this title the term "basic surtax credit" means the sum of: (1) The dividends paid during the taxable year, increased by the consent dividends credit provided in section 28, and reduced by the amount of the credit provided in section 26 (a), relating to interest on certain obligations of the United States and Gov- ernment corporations; 468 [52 STAT.
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