PUBLIC LAWS-CH. 289-MAY 28, 1938 Taxability of amounts specified in consents. Corporate share- holders. Basis of stock in hands of shareholders. Effect on capital ac- count of corporation. Amounts not includ- ed in shareholder's re- turn. Post, p. 536 . Credits against tax. title, such partial distribution and the consent distribution shall be considered as having been made in connection with each other and each shall be considered together with the other as one entire distribution. (f) TAXABILITY OF AMOUNTS SPECIFIED IN CONSENTS.-The total amount specified in a consent filed under subsection (d) shall be included as a taxable dividend in the gross income of the share- holder making such consent, and, if the shareholder is taxable with respect to a dividend only if received from sources within the United States, shall be included in the computation of his tax as a dividend received from sources within the United States; regardless of- (1) Whether he actually so includes it in his return; and (2) Whether the distribution by the corporation of an amount equal to the total sum included in all the consents filed, had actual distribution been made, would have been in whole or in part a taxable dividend; and (3) Whether the corporation is entitled to any consent divi- dends credit by reason of the filing of such consents, or to a credit less than the total sum included in all the consents filed. (g) CORPORATE SHAREHOLDERS. -I f the shareholder who makes the consent is a corporation, the amount specified in the consent shall be considered as part of its earnings or profits for the taxable year, and shall be included in the computation of its accumulated earnings and profits. (h) BASIS OF STOCK IN HANDS OF SHAREHOLDERS. -The amount specified in a consent made under subsection (d) shall, for the pur- pose of adjusting the basis of the consent stock with respect to which the consent was given, be treated as having been reinvested by the shareholder as a contribution to the capital of the corporation; but only in an amount which bears the same ratio to the consent divi- dends credit of the corporation as the amount of such shareholder's consent stock bears to the total amount of consent stock with respect to which consents are made. (i) EFFECT ON CAPITAL ACCOUNT OF CORPORATION.-The amount of the consent dividends credit allowed under subsection (c) shall be considered as paid in surplus or as a contribution to the capital of the corporation, and the accumulated earnings and profits as of the close of the taxable year shall be correspondingly reduced. (j) AMOUNTS NOT INCLUDED IN SIAREHOLDER'S RETURN.-The failure of a shareholder of consent stock to include in his gross income for the proper taxable year the amount specified in the con- sent made by him and filed by the corporation, shall have the same effect, with respect to the deficiency resulting therefrom, as is pro- vided in section 272 (f) with respect to a deficiency resulting from a mathematical error appearing on the face of the return. Part III-Credits Against Tax Taxes of foreign SEC. 31. TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF countries and United States possessions. UNITED STATES. Extent of credit. The amount of income, war-profits, and excess-profits taxes imposed by foreign countries or possessions of the United States shall be allowed as a credit against the tax, to the extent provided in Pot, p.so. section 131. Taxes withheld at source. Credit. Post, pp. 511,513. SEC. 32. TAXES WITHHELD AT SOURCE. The amount of tax withheld at the source under section 143 or 144 shall be allowed as a credit against the tax. 472 [52 STAT.
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