[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.854-2]

[Page 46-47]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.854-2  Notice to shareholders.

    (a) General rule. Section 854(b)(2) provides that the amount that a 
shareholder may treat as a dividend for purposes of the exclusion under 
section 116 for dividends received by individuals, the deduction under 
section 243 for dividends received by corporation, and, in the case of 
dividends received by individuals before January 1, 1965, the credit 
under section 34, shall not exceed the amount so designated by the 
company in a written notice to its shareholders mailed not later than 45 
days (30 days for a taxable year ending before Feb. 26, 1964) after the 
close of the company's taxable year. If, however, the amount so 
designated by the company in the notice exceeds the amount which may be 
treated by the shareholder as a dividend for such purposes, the 
shareholder is limited to the amount as correctly ascertained under 
section 854(b)(1) and paragraph (c) of Sec. 1.854-1.
    (b) Shareholder of record custodian of certain unit investment 
trusts. In any case where a notice is mailed pursuant to paragraph (a) 
of this section by a regulated investment company with respect to a 
taxable year of the regulated investment company ending after December 
8, 1970 to a shareholder of record who is a nominee acting as a 
custodian of a unit investment trust described in section 851(f)(1) and 
paragraph (d) of Sec. 1.851-7, the nominee shall furnish each holder of 
an interest in such trust with a written notice mailed on or before the 
55th day following the close of the regulated investment company's 
taxable year. The notice shall designate the holder's proportionate 
share of the amounts that may be treated as a dividend for purposes of 
the exclusion under section 116 for dividends received by individuals 
and the deduction under section 243 for dividends received by 
corporations shown on the notice received by the nominee pursuant to 
paragraph (a) of this section. This notice shall include the name and 
address of the nominee identified as such. This paragraph shall not 
apply if the regulated investment company agrees with the nominee to 
satisfy the notice requirements of paragraph (a) of this section with 
respect to each holder of an interest in the unit investment trust whose 
shares are being held by the nominee as custodian and not later than 45 
days following the close of the company's taxable year, files with the 
Internal Revenue Service office where such company's return is to be 
filed for the taxable year, a statement that the holders of the unit 
investment trust with whom the agreement was made have been directly 
notified by the regulated investment company. Such statement shall 
include the name, sponsor, and custodian of each unit investment trust 
whose holders have been directly notified. The nominee's requirements 
under this paragraph shall be deemed met if the regulated investment 
company transmits a copy of such statement to the nominee within such 
45-day period; provided however, if the regulated investment company 
fails or is unable to satisfy the requirements of this paragraph with 
respect to the holders of interest in the unit investment trust, it

[[Page 47]]

shall so notify the Internal Revenue Service within 45 days following 
the close of its taxable year. The custodian shall, upon notice by the 
Internal Revenue Service that the regulated investment company has 
failed to comply with the agreement, satisfy the requirements of this 
paragraph within 30 days of such notice.

[T.D. 7187, 37 FR 13257, July 6, 1972]