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INTERNAL REVENUE CODE OF 1954
Subchapter M—Regulated Investment Companies Sec. 851. Definition of regulated investnaent company. Sec. 852. Taxation of regulated investment companies and their shareholders. Sec. 853. Foreign tax credit allowed to shareholders. Sec. 854. Limitations applicable to dividends received from regulated investment company. Sec. 855. Dividends paid by regulated investment company after close of taxable year. SEC. 851. DEFINITION OF REGULATED INVESTMENT COMPANY. (a) GENERAL RULE. — For purposes of this subtitle, the term
"regulated investment company" means any domestic corporation (other than a personal holding company as defined in section 542)— (1) which, at all times during the taxable year, is registered under the Investment Company Act of 1940, as amended (54 Stat. 789; 15 U.S.C. 80 a-1 to 80 b-2), either as a management company or as a unit investment trust, or (2) which is a common trust fund or similar fund excluded by section 3(c)(3) of such Act (15 U.S.C. 80 a-3 (c)) from the definition of "investment company" and is not included in the definition of "common trust fund" by section 584(a). (b) LIMITATIONS.—^A corporation shall not be considered a regulated investment company for any taxable year unless— (1) it files m t h its return for the taxable year an election to b3 a regulated investment company or has made such election for a previous taxable year which began after December 31, 1941; (2) at least 90 percent of its gross income is derived from dividends, interest, and gains from the sale or other disposition of stock or securities; (3) less than 30 percent of its gross income is derived from the sale or other disposition of stock or securities held for less than 3 months; and (4) at the close of each quarter of the taxable year— (A) at least 50 percent of the value of its total assets is represented by— (i) cash and cash items (including receivables), Government securities and securities of other regulated investment companies, and (ii) other securities for purposes of this calculation limited, except and to the extent provided in subsection (e), in respect of any one issuer to an amount not greater in value than 5 percent of the value of the total assets of the taxpayer and to not more than 10 percent of the outstanding voting securities of such issuer, and (B) not more than 25 percent of the value of its total assets is invested in the securities (other than Government securities or the securities of other regulated investment companies) of any one issuer, or of two or more issuers which the taxpayer controls and §851
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