CH. 1—NORMAL TAXES AND SURTAXES
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conduct such investigations and hearings, either public or private, as it may deem appropriate. (4) DEFINITIONS.—The terms used in this subsection shall have the same meaning as in subsections (b)(4) and (c) of this section. SEC. 852. TAXATION OF REGULATED INVESTMENT COMPANIES AND THEIR SHAREHOLDERS. (a) REQUIREMENTS
APPLICABLE
TO
REGULATED
INVESTMENT
COMPANIES.—The provisions of this subchapter shall not be applicable to a regulated investment company for a taxable year unless— (1) the deduction for dividends paid during the taxable year (as defined in section 561, but without regard to capital gains dividends) equals or exceeds 90 percent of its investment company taxable income for the taxable year (determined without regard to subsection (b)^ (2)(D)), and (2) the investment company complies for such year with regulations prescribed by the Secretary or his delegate for the purpose of ascertaining the actual ownership of its outstanding stock. (b) M E T H O D OF TAXATION OF COMPANIES AND SHAREHOLDERS.— (1) IMPOSITION OF NORMAL TAX AND SURTAX ON REGULATED INVESTMENT COMPANIES.—There is hereby imposed for each taxable
year upon the investment company taxable income of every regulated investment company a normal tax and surtax computed as provided in section 11, as though the investment company taxable income were the taxable income referred to in section 11. For purposes of computing the normal tax under section 11, the taxable income and the dividends paid deduction of such investment company for the taxable year (computed without regard to capital gains dividends) shall be reduced by the deduction provided by section 242 (relating to partially tax-exempt interest). (2) INVESTMENT COMPANY TAXABLE INCOME.—The investment company taxable income shall be the taxable income of the regulated investment company adjusted as follows: (A) There shall be excluded the excess, if any, of the net longterm capital gain over the net short-term capital loss. (B) The net operating loss deduction provided in section 172 shall not be allowed. (C) The deductions for corporations provided in part VIII (except section 248) in subchapter B (section 241 and following, relating to the deduction for dividends received, etc.) shall not be allowed. (D) The deduction for dividends paid (as defined in section 561) shall be allowed, but shall be computed without regard to capital gains dividends. (E) The taxable income shall be computed without regard to section 443(b) (relating to computation of tax on change of annual accounting period). (3) CAPITAL GAINS.— (A) IMPOSITION OF TAX.—There is hereby imposed for each
taxable year in the case of every regulated investment company a tax of 25 percent of the excess, if any, of the net long-term capital gain over the sum of— •{i) the net short-term capital loss, and § 852(b)(3)(A)(i)
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