52 STAT.] 75TH CONG., 3D SESS.-CH. 289-MAY 28, 1938 (2) In the case of a taxable year beginning after December 31, 1938, the net operating loss credit provided in section 26 (c) (1); (3) The bank affiliate credit provided in section 26 (d). The aggregate of the amounts under paragraphs (2) and (3) shall not exceed the adjusted net income for the taxable year. (c) DIVIDEND CARRY-OvER.-T here shall be computed with respect to each taxable year of a corporation a dividend carry-over to such year from the two preceding taxable years, which shall consist of the sum of- (1) The amount of the basic surtax credit for the second pre- ceding taxable year, reduced by the adjusted net income for such year, and further reduced by the amount, if any, by which the adjusted net income for the first preceding taxable year exceeds the sum of- (A) The basic surtax credit for such year; and (B) The excess, if any, of the basic surtax credit for the third preceding taxable year (if not beginning before Jan- uary 1, 1936) over the adjusted net income for such year; and (2) The amount, if any, by which the basic surtax credit for the first preceding taxable year exceeds the adjusted net income for such year. In the case of a preceding taxable year, referred to in this subsection, which begins in 1936 or 1937, the adjusted net income shall be the adjusted net income as defined in section 14 of the Revenue Act of 1936, and the basic surtax credit shall be only the dividends paid credit computed under the Revenue Act of 1936 without the benefit of the dividend carry-over provided in section 27 (b) of such Act. (d) DIVIDENDS IN KIND.- If a dividend is paid in property other than money (including stock of the corporation if held by the cor- poration as an investment) the amount with respect thereto which shall be used in computing the basic surtax credit shall be the adjusted basis of the property in the hands of the corporation at the time of the payment, or the fair market value of the property at the time of the payment, whichever is the lower. (e) DIVIDENDS IN OBLIGATIONS OF THE CORPORATION.- If a divi- dend is paid in obligations of the corporation, the amount with respect thereto which shall be used in computing the basic surtax credit shall be the face value of the obligations, or their fair market value at the time of the payment, whichever is the lower. If the fair market value of any such dividend paid in any taxable year of the corporation beginning after December 31 1935, is lower than the face value, then when the obligation is redeemed by the corporation in a taxable year of the corporation beginning after December 31, 1937, the excess of the amount for which redeemed over the fair market value at the time of the dividend payment (to the extent not allowable as a deduction in computing net income for any taxable year) shall be treated as a dividend paid in the taxable year in which the redemption occurs. (f) TAXABLE STOCK DIVIDENDS. -In case of a stock dividend or stock right which is a taxable dividend in the hands of shareholders under section 115 (f), the amount with respect thereto which shall be used in computing the basic surtax credit shall be the fair market value of the stock or the stock right at the time of the payment. (g) DISTRIBUTONS IN LIQmUDATION.- In the case of amounts dis- tributed in liquidation the part of such distribution which is prop- erly chargeable to the earnings or profits accumulated after February 28, 1913, shall, for the purposes of computing the basic surtax credit under this section, be treated as a taxable dividend paid. 469 Ante, p. 468. Dividend carry-over . Adjusted net in. come. 49 Stat. 1656, 1665. 26 U. S. C., Supp. III, §§ 13a, 27 (b). Dividends in kind. Dividends in obli- gations of corporation. Taxable stock divi- dends. Post, p. 497. Distributions in liq- nidation.
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