PUBLIC LAWS-CH. 289-MAY 28, 1938 Preferential divi- dends. Nontaxable distriE butions. Consent dividends credit. Definitions. "Consent stock." "Preferred divi- dends. " " Consent divi- dends day. " "Consent distrlbu. tion. " " Partial distribu- tion." "Preferential distri- bution." (h) PREFERENTIAL DIIDENDS.- The amount of any distribution (although each portion thereof is received by a shareholder as a tax- able dividend), not made in connection with a consent distribution (as defined in section 28 (a) (4)), shall not be considered as divi- dends paid for the purpose 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 sec- tion 28. (i) NONTAXABLE DISTRIBUTIONS.-I f any part of a distribution (including stock dividends and stock rights) is not a taxable divi- dend in the hands of such of the shareholders as are subject to tax- ation under this title for the period in which the distribution is made, such part shall not be included in computing the basic surtax credit. SEC. 28 . CONSENT DIVIDENDS CREDIT. (a) DEFINrITONs. -As used in this section- (1) CONSENT STOCK.- The term "consent stock" means the class or classes of stock entitled, after the payment of preferred dividends (as defined in paragraph (2)), to a share in the distri- bution (other than in complete or partial liquidation) within the taxable year of all the remaining earnings or profits, which share constitutes the same proportion of such distribution regard- less of the amount of such distribution. (2) PREFERRED DIVIDENDS.-The term "preferred dividends" means a distribution (other than in complete or partial liquida- tion), 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. (3) CONSENT DIVIDENDS DAY. - The term "consent dividends day" means the last day of the taxable year of the corporation, unless during the last month of such year there have occurred one or more days on which was payable a partial distribution (as defined in paragraph (5)), in which case it means the last of such days. (4) CONSENT DISTRIBUTION. - The term "consent distribution" means the distribution 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 share- holder making a consent filed by the corporation under subsec- tion (d), the specific amount stated in such consent. (5) PARTIAL DISTRIBUTION.- T he term "partial distribution" means such part of an actual distribution, payable during the last month of the taxable year of the corporation, as constitutes a distribution on the whole or any part of the consent stock (as defined in paragraph (1)), which part of the distribution, if considered by itself and not in connection with a consent distri- bution (as defined in paragraph (4)), would be a preferential distribution, as defined in paragraph (6). (6) PREFERENTIAL DISTRIBUTION. - T he term "preferential dis- tribution" means a distribution which is not pro rata, or which is with preference to any share of stock as compared with other shares of the same class, or to any class of consent stock as com- pared with any other class of consent stock. 470 [52 STAT.
�
