SECTION 4. SHAREHOLDER

TREATMENT

Section 4 of Notice 97–64 continues to apply with appropriate modifications to take into account changes to § 1(h). Thus, a shareholder that receives a capital gain dividend from a RIC treats the dividend as follows:

• A 20% rate gain distribution is an amount of long-term capital gain in the 20-percent group (which may be taxed at a 20-percent rate, a 15percent rate, or a 0-percent rate, depending on the shareholder’s taxable income);

• An unrecaptured section 1250 gain distribution is an amount of long-term capital gain in the 25-percent group;

• A 28% rate gain distribution is an amount of long-term capital gain in the 28-percent group; and

• A section 1202 gain distribution generally is an amount of gain from a sale or exchange of qualified small business stock held for more than five years, subject to additional requirements and rules under § 1202(g).