PUBLIC LAW 96-223—APR. 2, 1980
94 STAT. 307
(5) Paragraph (5) of section 702(a) (relating to income and 26 USC 702. credits of partners) is amended by inserting "or interest" after "dividends". (6) Subsection (h) of section 854 (relating to other dividends) is 26 USC 854. amended— (A) by inserting "AND TAXABLE INTEREST" in the caption after "DIVIDENDS", (B) by striking out the caption of paragraph (1) and inserting in lieu thereof "DEDUCTION UNDER SECTION 243.—", (C) by striking out "the exclusion under section 116 and" in paragraph (1), (D) by redesignating paragraphs (2) and (3) as (3) and (4), (E) by inserting after paragraph (1) the following new paragraph: "(2) EXCLUSION UNDER SECTION II 6. — I n the case of a dividend -Ante, p. 305. (other than a dividend described in subsection (a)) received from a regulated investment company— "(A) which meets the requirements of section 852(a) for the 26 USC 852. taxable year in which it paid the dividend, "(B) the aggregate interest received by which during the taxable year is less than 75 percent of its gross income, and "(C) the aggregate dividends received by which during the taxable year is less than 75 percent of its gross income, then, in computing the exclusion under section 116, there shall be taken into account only that portion of the dividend which bears the same ratio to the amount of such dividend as the sum of the aggregate dividends received and aggregate interest received bears to gross income. For purposes of the preceding sentence, gross income and aggregate interest received shall each be reduced by so much of the deduction allowable by section 163 for 26 USC 163. the taxable year as does not exceed aggregate interest received for the taxable year." (F) by striking out "section 116(b)" in subparagraph (B) of paragraph (4) (as redesignated by subparagraph (D) of this paragraph) and inserting in lieu thereof "section 116(b)(2)", (G) by striking out "section 116(c)" in subparagraph (B) of paragraph (4) (as so redesignated) and inserting in lieu thereof "section 116(c)(2)", and (H) by adding at the end of paragraph (4) (as redesignated) the following new subparagraph: "(C) The term 'aggregate interest received' includes only "Aggregate interest described in section 116(c)(1)." interest (7) The table of sections for part I of subchapter M of chapter 1 ^^^^"^ is amended by inserting "and taxable interest' after "dividends" in the item relating to section 854. (8) Subsection (c) of section 857 (relating to restrictions applica- 26 USC 857. ble to dividends received from real estate investment trusts) is amended to read as follows: "(c) LIMITATIONS APPLICABLE TO DIVIDENDS RECEIVED FROM REAL ESTATE INVESTMENT TRUSTS.— "(1) CAPITAL GAIN DIVIDEND.—For purposes of section 116
(relating to exclusion for dividends and interest received by individuals), a capital gain dividend (as defined in subsection (b)(3)(C)) received from a real estate investment trust shall not be considered a dividend. "(2) OTHER DIVIDENDS.—In the ceise of a dividend received from a real estate investment trust (other than a dividend described in paragraph (1)), if—
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