SECTION 2. BACKGROUND — Internal Revenue Bulletin 2009-20

.01 Section 860 of the Code and the Income Tax Regulations (Regulations) thereunder (together, “the Deficiency Dividend Procedures”) allow a regulated investment company (RIC) or a real estate investment trust (REIT) to be relieved from the payment of a deficiency in (or to be allowed a credit or refund of) certain taxes.

.02 To effect this relief, the Deficiency Dividend Procedures allow an additional deduction for dividend distributions that meet the requirements of § 860 and § 1.860–2 of the Regulations (“deficiency

dividends”). The deduction is allowed in computing the deduction for dividends paid for the taxable year for which the deficiency is determined.

.03 A RIC or REIT is allowed a deduction for a deficiency dividend only if, among other things, there is a determination (as defined in § 860(e) and § 1.860–2(b)(1) of the Regulations) that results in an adjustment (as defined in § 860(d)(1) or 860(d)(2)) for the taxable year for which the deficiency dividend is paid.

.04 Under the Deficiency Dividend Procedures, the date of the determination controls the timeliness of certain acts that the RIC or REIT must perform. (See italicized phrases in Section 2.04 through 2.06 of this revenue procedure.) For example, § 860(f)(1) provides generally that, for purposes of § 860, the term “deficiency dividends” means a distribution of property that—

• Is made by a RIC or REIT; • Is made on or after the date of the de¶

termination and before the filing of a claim under § 860(g); and

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• Would have been includible in the¶

computation of the deduction under § 561 for dividends paid for the taxable year with respect to which the liability for tax resulting from the determination exists, if that distribution had been made during that taxable year.

.05 Section 860(f)(1) provides further that no distribution of property shall be considered as deficiency dividends for purposes of § 860(a) unless the property is dis- tributed within 90 days after the determi- nation and unless a claim for a deficiency dividend deduction with respect to the distribution is filed pursuant to § 860(g).

.06 Section 860(g) provides that no deficiency dividend deduction shall be allowed under § 860(a) unless (under regulations prescribed by the Secretary) a claim therefor is filed within 120 days after the date of the determination . Under § 1.860–2(a)(2) of the Regulations, the claim that § 860(g) requires is filed on Form 976, “Claim for Deficiency Divi- dends Deductions by a Personal Holding Company, Regulated Investment Com- pany, or Real Estate Investment Trust.”

May 18, 2009 1011 2009–20 I.R.B.

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