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Title 26 — Internal Revenue CodeRelease 119-73

§316 Dividend defined

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter C— - Corporate Distributions and Adjustments › Part PART I— - DISTRIBUTIONS BY CORPORATIONS › Subpart Subpart C— - Definitions; Constructive Ownership of Stock › § 316

Last updated Apr 6, 2026|Official source

Summary

Defines what counts as a dividend for tax purposes. A dividend is any property a corporation gives to its shareholders that comes from its profits. That includes profits built up after February 28, 1913, or profits for the taxable year counted as of the end of that year before any distributions are subtracted, no matter how much profit is left when the payment is made. There are special rules and exceptions. The rule does not apply to insurance company dividends paid to policyholders. For personal holding companies (see section 542 and related rules), a complete liquidation within 24 months after a liquidation plan can count as a dividend only for non‑corporate recipients, only if the company labels and notifies them as dividend amounts under Treasury rules, and only up to their share of undistributed personal holding company income. A “deficiency dividend” under section 860(f) is also a dividend. For certain investment companies with a non‑calendar year, current earnings are first applied to distributions made before January 1 for any class of stock when distributions exceed available earnings.

Full Legal Text

Title 26, §316

Internal Revenue Code — Source: USLM XML via OLRC

(a)For purposes of this subtitle, the term “dividend” means any distribution of property made by a corporation to its shareholders—
(1)out of its earnings and profits accumulated after February 28, 1913, or
(2)out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
(b)(1)The definition in subsection (a) shall not apply to the term “dividend” as used in subchapter L in any case where the reference is to dividends of insurance companies paid to policyholders as such.
(2)(A)In the case of a corporation which—
(i)under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or
(ii)for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year,
(B)For purposes of subparagraph (A), the term “distribution of property” includes a distribution in complete liquidation occurring within 24 months after the adoption of a plan of liquidation, but—
(i)only to the extent of the amounts distributed to distributees other than corporate shareholders, and
(ii)only to the extent that the corporation designates such amounts as a dividend distribution and duly notifies such distributees of such designation, under regulations prescribed by the Secretary, but
(iii)not in excess of the sum of such distributees’ allocable share of the undistributed personal holding company income for such year, computed without regard to this subparagraph or section 562(b).
(3)The term “dividend” also means any distribution of property (whether or not a dividend as defined in subsection (a)) which constitutes a “deficiency dividend” as defined in section 860(f).
(4)In the case of a regulated investment company that has a taxable year other than a calendar year, if the distributions by the company with respect to any class of stock of such company for the taxable year exceed the company’s current and accumulated earnings and profits which may be used for the payment of dividends on such class of stock, the company’s current earnings and profits shall, for purposes of subsection (a), be allocated first to distributions with respect to such class of stock made during the portion of the taxable year which precedes January 1.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2010—Subsec. (b)(4). Pub. L. 111–325 added par. (4). 1978—Subsec. (b)(3). Pub. L. 95–600 inserted “regulated investment company or” after “distributions by a” in heading and substituted in text “section 860(f)” for “section 859(d)”. 1976—Subsec. (b)(2)(B)(ii). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Subsec. (b)(3). Pub. L. 94–455, § 1601(d), added par. (3). 1964—Subsec. (b)(2). Pub. L. 88–272 inserted definition of “distribution of property”. 1956—Subsec. (b)(1). Act Mar. 13, 1956, substituted “subchapter L” for “section 803(e), 821(a)(2), and 832(c)(11)”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 Amendment Pub. L. 111–325, title III, § 305(b), Dec. 22, 2010, 124 Stat. 3549, provided that: “The amendment made by this section [amending this section] shall apply to distributions made in taxable years beginning after the date of the enactment of this Act [Dec. 22, 2010].”

Effective Date

of 1978 AmendmentAmendment by Pub. L. 95–600 applicable with respect to determinations (as defined in section 860(e) of this title) after Nov. 6, 1978, see section 362(e) of Pub. L. 95–600, set out as an

Effective Date

note under section 860 of this title.

Effective Date

of 1976 AmendmentFor

Effective Date

of amendment by section 1601(d) of Pub. L. 94–455, see section 1608(a) of Pub. L. 94–455, set out as a note under section 857 of this title.

Effective Date

of 1964 Amendment Pub. L. 88–272, title II, § 225(l), Feb. 26, 1964, 78 Stat. 94, provided that: “(1) The

Amendments

made by this section [enacting section 1022, redesignating former section 1022 as 1023, amending this section and section 331, 333, 381, 541, 542, 543, 544, 545, 551, 553, 554, 562, 856, 1016, 1361, 6501, and the analysis preceding section 1011, and enacting provisions set out as a note under section 333 of this title] (other than by subsections (c)(1), (f), (g), and (j) [enacting section 1022, redesignating former section 1022 as 1023, amending this section and section 331, 333, 542, 551, 562, 1016, and the analysis preceding section 1011 of this title]) shall apply to taxable years beginning after
December 31, 1963. “(2) The amendment made by subsection (c)(1) [amending section 542 of this title] shall apply to taxable years beginning after
October 16, 1962. “(3) The

Amendments

made by subsections (f) and (g) [amending this section and section 331, 333, 551, and 562 of this title] shall apply to distributions made in any taxable year of the distributing corporation beginning after December 31, 1963. “(4) The

Amendments

made by subsection (j) [enacting section 1022, redesignating former section 1022 as 1023, and amending section 1016 and the analysis preceding section 1011 of this title] shall apply in respect of decedents dying after
December 31, 1963. “(5) Subsection (h) [set out as a note under section 333 of this title] shall apply to taxable years beginning after
December 31, 1963.”

Effective Date

of 1956 AmendmentAct Mar. 13, 1956, ch. 83, § 6, 70 Stat. 49, provided that: “The

Amendments

made by this Act [amending this section and section 501, 594, 801 to 805, 811 to 813, 816 to 818, 821, 822, 832, 841, 842, 843, 891, 1201, 1504, and 4371 of this title] shall apply only to taxable years beginning after December 31, 1954.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 316

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73