[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.852-3]

[Page 19]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.852-3  Investment company taxable income.

    Section 852(b)(2) requires certain adjustments to be made to convert 
taxable income of the investment company to investment company taxable 
income, as follows:
    (a) The excess, if any, of the net long-term capital gain over the 
net short-term capital loss shall be excluded;
    (b) The net operating loss deduction provided in section 172 shall 
not be allowed;
    (c) The special deductions provided in part VIII (section 241 and 
following, except section 248), subchapter B, chapter 1 of the Code, 
shall not be allowed. Those not allowed are the deduction for partially 
tax-exempt interest provided by section 242, the deductions for 
dividends received provided by sections 243, 244, and 245, and the 
deduction for certain dividends paid provided by section 247. However, 
the deduction provided by section 248 (relating to organizational 
expenditures), otherwise allowable in computing taxable income, shall 
likewise be allowed in computing the investment company taxable income. 
See section 852(b)(1) and paragraph (a) of Sec. 1.852-2 for treatment of 
the deduction for partially tax-exempt interest (provided by section 
242) for purposes of computing the normal tax under section 11;
    (d) The deduction for dividends paid (as defined in section 561) 
shall be allowed, but shall be computed without regard to capital gains 
dividends (as defined in section 852(b)(3)(C) and paragraph (c) of 
Sec. 1.852-4); and
    (e) The taxable income shall be computed without regard to section 
443(b). Thus, the taxable income for a period of less than 12 months 
shall not be placed on an annual basis even though such short taxable 
year results from a change of accounting period.

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