CH. 1—NORMAL TAXES AND SURTAXES
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any State, Territory, possession of the United States, or the Canal Zone, or of any other banking corporation engaged in the business of industrial banking and under the supervision of a State banking department or of the Comptroller of the Currency, or of any incorporated domestic insurance company, there shall be allowed as a deduction from gross income, in addition to deductions otherwise provided for in this subtitle, any dividend (not including any distribution in liquidation) paid, within the taxable year, to the United States or to any instrumentality thereof exempt from Federal income taxes, on the preferred stock of the corporation owned by the United States or such instrumentality. The amount allowable as a deduction under this section shall reduce the deduction for dividends paid otherwise computed under section 561. SEC. 584. COMMON TRUST FUNDS.
(a) DEFINITIONS.—For purposes of this subtitle, the term "common trust fund" means a fund maintained by a bank— (1) exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity as a trustee, executor, administrator, or guardian; and (2) in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System pertaining to the collective investment of trust funds by national banks. (b) TAXATION OF COMMON T R U S T F U N D S. — A common trust fund shall not be subject to taxation under this chapter and for purposes of this chapter shall not be considered a corporation. (c) INCOME OF PARTICIPANTS IN F U N D. — (1) INCLUSIONS IN TAXABLE INCOME.—Each
participant in the common trust fund in computing its taxable income shall include, whether or not distributed and whether or not distributable— (A) as part of its gains and losses from sales or exchanges of capital assets held for not more than 6 months, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for not more than 6 months; (B) as part of its gains and losses from sales or exchanges of capital assets held for more than 6 months, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for more than 6 months; (C) its proportionate share of the ordinary taxable income or the ordinary net loss of the common trust fund, computed as provided in subsection (d). (2) D IV I D E N D S AND PARTIALLY TAX EXEMPT INTEREST.—The
proportionate share of each participant in the amount of dividends to which section 34 or section 116 applies, and in the amount of partially tax exempt interest on obligations described in section 35 or section 242, received by the common trust fund shall be considered for purposes of such sections as having been received by such participant. If the common trust fund elects under section 171 (relating to amortizable bond premium) to amortize the premium on such obligations, for purposes of the preceding sentence the proportionate share of the participant of such interest received § 584(c)(2)
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