[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.34-3]

[Page 105-106]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.34-3  Dividends to which the credit and exclusion apply.

    (a) General rule. The credit under section 34 and the exclusion 
under section 116 apply only to distributions of property defined as 
dividends by section 316. Thus, the credit and the exclusion are not 
allowed with respect to patronage dividends paid by either exempt or 
taxable farm cooperatives. Nor are they allowed for distributions to 
nonstockholding policyholders by an insurance company having shares of 
stock or for any distribution by a mutual insurance company. See 
paragraph (b) of this section for an additional restriction with respect 
to stock life insurance companies. The credit and the exclusion are, 
however, allowed with respect to dividends paid on capital stock by 
nonexempt cooperatives and with respect to dividends paid on capital 
stock by building and loan associations. However, see paragraph (b) of 
this section with respect to so-called dividends paid by building and 
loan associations ineligible for the credit and the exclusion. The 
credit and the exclusion are allowed with respect to distributions from 
any organization taxed as a corporation if the distribution falls within 
the definition of a dividend in section 316.
    (b) Dividends from certain corporations. (1) Section 34 (c) and (d) 
contains further restrictions on the type of distributions which are 
treated as dividends for purposes of the credit and exclusion. Thus, no 
credit or exclusion is applicable with respect to dividends received 
from a corporation organized under the China Trade Act, 1922; from stock 
life insurance companies before

[[Page 106]]

January 1, 1959, in taxable years ending before such date; from 
corporations which during their taxable year of the distribution or 
their preceding taxable year were corporations to which section 931 
applies (relating to income from sources within possessions of the 
United States); from corporations which during the taxable year of the 
distribution or the preceding taxable year are corporations exempt from 
tax either under section 501, relating to charitable, etc., 
organizations, or under section 521, relating to farmers' cooperative 
associations.
    (2) So-called dividends paid by mutual savings banks, cooperative 
banks, and building and loan associations which are allowed as a 
deduction under section 591 are ineligible for the credit and exclusion.
    (3) For special rules as to the limitation on the amount of 
dividends for which a credit and exclusion are allowable in the case of 
dividends paid by a regulated investment company, see section 854 and 
the regulations thereunder.
    (4) See section 857(c) and paragraph (d) of Sec. 1.857-4 for special 
rules which deny a credit under section 34 and exclusion under section 
116 in the case of dividends received from a real estate investment 
trust with respect to a taxable year for which such trust is taxable 
under part II, subchapter M, chapter 1 of the Code.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960, as amended by T.D. 6598, 27 FR 
4092, Apr. 28, 1962; T.D. 6625, 27 FR 12541, Dec. 19, 1962]