SEC. 7. EXAMPLES

(1) Example 1. RIC X ’s taxable year ends on July 31. RIC X has only the following capital gains and losses for the periods indicated:

8/1 to 10/31/97 gain loss net Long-term capital gain or loss

stock held 19 months 300 (150) 150 stock held 13 months 200 (100) 100 Short-term capital gain or

loss 100 0 100 11/1 to 7/31/98 Long-term capital gain or loss

stock held 19 months 200 (50) 150 stock held 13 months 200 (300) (100) Short-term capital gain or

loss 0 (100) (100)

Because X has a taxable year ending in July and a post-October net capital loss of $50, it is required by § 852(b)(3)(C) and § 1.852-11(e) to make a deferral adjustment and so does not make a bifurcation adjustment. X must disregard the capital gains and losses for the post-October period in computing its net capital gains for purposes of designating capital gain dividends for its taxable year ending July 31, 1998. X must also disregard those gains and losses for purposes of calculating the various maximum distributable amounts of gain. For this taxable year, therefore, X may designate up to $250 as capital gain dividends, of which up to $150 may be designated as 20% rate gain distributions. The amount that may be designated as 28% rate gain distributions (or is a 28% rate gain distribution if designated only as a capital gain dividend) is $250 minus any amounts properly designated as 20% rate gain distributions. X must take the post-October capital gains and losses into account on August 1, 1998 (the first day of the next taxable year), to determine its net capital gain and various maximum distributable amounts of gain for the taxable year beginning on that date.

(2) Example 2. RIC Y ’s taxable year ends on July 31. RIC Y has only the following capital gains and losses for the periods indicated:

November 24, 1997 8 1997–47 I.R.B.

shareholders information sufficient to determine the following:

.01 The amount of 28% rate gain included on line 1 of Form 2439. Filers should advise recipients to report this amount on Schedule D (Form 1040), line 11, column (g). .02 The amount of unrecaptured section 1250 gain included on line 1 of Form 2439. Filers should advise recipients to report this amount on Schedule D (Form 1040), line 25. Filers may provide this additional information to shareholders on a substitute statement or on a separate statement. Filers are not required to report this additional information on Forms 2439 filed with the IRS.