INCOME TAX 7 (e) TAX ON PERSONAL HOLDING COMPANIES.- For surtax on personal holding companies, see section 500. (f) AVOIDANCE OF SURTAXES BY INCORPORATION.- For surtax on corporations which accumulate surplus to avoid surtax on shareholders, see section 102. SEC. 13. TAX ON CORPORATIONS IN GENERAL. (a) ADJUSTED NET INCOME. - For the purposes of this chapter the term "adjusted net income" means the net income minus the credit provided in section 26 (a), relating to interest on certain obligations of the United States and Government corporations. (b) IMPOSITION OF TAx. -There shall be levied, collected, and paid for each taxable year upon the net income of every corporation the net income of which is more than $25,000 (except a corporation sub- ject to the tax imposed by section 14, section 231 (a), Supplement G, or Supplement Q) a tax computed under subsection (c) of this sec- tion or a tax computed under subsection (d) of this section, which- ever tax is the lesser. (c) GENERAL RULE. - The tax computed under this subsection shall be as follows: (1) A tentative tax shall first be computed equal to 19 per centum of the adjusted net income. (2) The tax shall be the tentative tax reduced by the sum of- (A) 1612 per centum of the credit for dividends received pro- vided in section 26 (b); and (B) 21/2 per centum of the dividends paid credit provided in section 27, but not to exceed 2/2 per centum of the adjusted net income. (d) ALTERNATIVE TAX (CORPORATIONS WrIH NET INCOME SLIGHTLY MoRE THAN $25,000). - (1) If no portion of the gross income consists of interest allowed as a credit by section 26 (a) (relating to interest on certain obli- gations of the United States and Government corporations), or of dividends of the class with respect to which credit is allowed by section 26 (b), then the tax computed under this subsection shall be equal to $3,525, plus 32 per centum of the amount of the net income in excess of $25,000. (2) If any portion of the gross income consists of such interest or dividends, then the tax computed under this subsection shall be as follows: (A) The net income shall be divided into two divisions, the first division consisting of $25,000, and the second division con- sisting of the remainder of the net income. (B) To the first division shall be allocated, until an aggregate of $25,000 has been so allocated: First, the portion of the gross income consisting of such interest; second, the portion of the gross income consisting of such dividends; and third, an amount equal to the excess, if any, of $25,000 over the amounts already allo- cated to the first division. (C) To the second division shall be allocated, until there has been so allocated an aggregate equal to the excess of the net income over $25,000: First, the portion of the gross income con- sisting of such interest which is not already allocated to the first division; second, the portion of the gross income consisting of such dividends which is not already allocated to the first division; and third, an amount equal to the excess, if any, of the net income over the sum of $25,000 plus the amounts already allocated to the second division. (D) The tax shall be equal to the sum of the following: (i) A tax on the $25,000 allocated to the first division, computed under section 14 (c), on the basis of the allocation made to the first division and as if the amount so allocated constituted the entire net income of the corporation.
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