{"identifier":"/us/usc/t26/s291","title":26,"num":"\u00a7\u202f291.","heading":"Special rules relating to corporate preference items","text":"\u00a7\u202f291.\nSpecial rules relating to corporate preference items\n(a)\nReduction in certain preference items, etc.\nFor purposes of this subtitle, in the case of a corporation\u2014\n(1)\nSection 1250 capital gain treatment\nIn the case of section 1250 property which is disposed of during the taxable year, 20 percent of the excess (if any) of\u2014\n(A) the amount which would be treated as ordinary income if such property was section 1245 property, over\n(B) the amount treated as ordinary income under section 1250 (determined without regard to this paragraph),\nshall be treated as gain which is ordinary income under section 1250 and shall be recognized notwithstanding any other provision of this title. Under regulations prescribed by the Secretary, the provisions of this paragraph shall not apply to the disposition of any property to the extent section 1250(a) does not apply to such disposition by reason of section 1250(d).\n(2)\nReduction in percentage depletion\nIn the case of iron ore and coal (including lignite), the amount allowable as a deduction under section 613 with respect to any property (as defined in section 614) shall be reduced by 20 percent of the amount of the excess (if any) of\u2014\n(A) the amount of the deduction allowable under section 613 for the taxable year (determined without regard to this paragraph), over\n(B) the adjusted basis of the property at the close of the taxable year (determined without regard to the depletion deduction for the taxable year).\n(3)\nCertain financial institution preference items\nThe amount allowable as a deduction under this chapter (determined without regard to this section) with respect to any financial institution preference item shall be reduced by 20 percent.\n(4)\nAmortization of pollution control facilities\nIf an election is made under section 169 with respect to any certified pollution control facility, the amortizable basis of such facility for purposes of such section shall be reduced by 20 percent.\n(b)\nSpecial rules for treatment of intangible drilling costs and mineral exploration and development costs\nFor purposes of this subtitle, in the case of a corporation\u2014\n(1)\nIn general\nThe amount allowable as a deduction for any taxable year (determined without regard to this section)\u2014\n(A) under section 263(c) in the case of an integrated oil company, or\n(B) under section 616(a) or 617(a),\nshall be reduced by 30 percent.\n(2)\nAmortization of amounts not allowable as deductions under paragraph (1)\nThe amount not allowable as a deduction under section 263(c), 616(a), or 617(a) (as the case may be) for any taxable year by reason of paragraph (1) shall be allowable as a deduction ratably over the 60-month period beginning with the month in which the costs are paid or incurred.\n(3)\nDispositions\nFor purposes of section 1254, any deduction under paragraph (2) shall be treated as a deduction allowable under section 263(c), 616(a), or 617(a) (whichever is appropriate).\n(4)\nIntegrated oil company defined\nFor purposes of this subsection, the term \u201cintegrated oil company\u201d means, with respect to any taxable year, any producer of crude oil to whom subsection (c) of section 613A does not apply by reason of paragraph (2) or (4) of section 613A(d).\n(5)\nCoordination with cost depletion\nThe portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.\n(c)\nSpecial rules relating to pollution control facilities\nFor purposes of this subtitle\u2014\n(1)\nAccelerated cost recovery deduction\nSection 168 shall apply with respect to that portion of the basis of any property not taken into account under section 169 by reason of subsection (a)(4).\n(2)\n1250 Recapture\nSubsection (a)(1) shall not apply to any section 1250 property which is part of a certified pollution control facility (within the meaning of section 169(d)(1)) with respect to which an election under section 169 was made.\n(d)\nSpecial rule for real estate investment trusts\nIn the case of a real estate investment trust (as defined in section 856), the difference between the amounts described in subparagraphs (A) and (B) of subsection (a)(1) shall be reduced to the extent that a capital gain dividend (as defined in section 857(b)(3)(C),\n1\n1 See References in Text note below.\n(e)\nDefinitions\nFor purposes of this section\u2014\n(1)\nFinancial institution preference item\nThe term \u201cfinancial institution preference item\u201d includes the following:\n[(A)\nRepealed. Pub. L. 101\u2013508, title XI, \u00a7\u202f11801(c)(12)(B), Nov. 5, 1990, 104 Stat. 1388\u2013527]\n(B)\nInterest on debt to carry tax-exempt obligations acquired after December 31, 1982, and before August 8, 1986\n(i)\nIn general\nIn the case of a financial institution which is a bank (as defined in section 585(a)(2)), the amount of interest on indebtedness incurred or continued to purchase or carry obligations acquired after\nDecember 31, 1982\nAugust 8, 1986\n(ii)\nDetermination of interest allocable to indebtedness on tax-exempt obligations\nUnless the taxpayer (under regulations prescribed by the Secretary) establishes otherwise, the amount determined under clause (i) shall be an amount which bears the same ratio to the aggregate amount allowable (determined without regard to this section and section 265(b)) to the taxpayer as a deduction for interest for the taxable year as\u2014\n(I) the taxpayer\u2019s average adjusted basis (within the meaning of section 1016) of obligations described in clause (i), bears to\n(II) such average adjusted basis for all assets of the taxpayer.\n(iii)\nInterest\nFor purposes of this subparagraph, the term \u201cinterest\u201d includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.\n(iv)\nApplication of subparagraph to certain obligations issued after August 7, 1986\nFor application of this subparagraph to certain obligations issued after\nAugust 7, 1986\nAugust 7, 1986\n(2)\nSection 1245 and 1250 property\nThe terms \u201csection 1245 property\u201d and \u201csection 1250 property\u201d have the meanings given such terms by sections 1245(a)(3) and 1250(c), respectively.","url":"https://projectusc.org/usc/t26/s291.html","content":[{"t":"sec","id":"/us/usc/t26/s291","children":[{"t":"num","text":"\u00a7\u202f291."},{"t":"heading","text":"Special rules relating to corporate preference items"},{"t":"subsec","id":"/us/usc/t26/s291/a","children":[{"t":"num","text":"(a)"},{"t":"heading","text":"Reduction in certain preference items, etc."},{"t":"chapeau","text":"For purposes of this subtitle, in the case of a corporation\u2014"},{"t":"para","id":"/us/usc/t26/s291/a/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Section 1250 capital gain treatment"},{"t":"chapeau","text":"In the case of section 1250 property which is disposed of during the taxable year, 20 percent of the excess (if any) of\u2014"},{"t":"subpara","id":"/us/usc/t26/s291/a/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the amount which would be treated as ordinary income if such property was section 1245 property, over","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s291/a/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the amount treated as ordinary income under section 1250 (determined without regard to this paragraph),","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"shall be treated as gain which is ordinary income under section 1250 and shall be recognized notwithstanding any other provision of this title. Under regulations prescribed by the Secretary, the provisions of this paragraph shall not apply to the disposition of any property to the extent section 1250(a) does not apply to such disposition by reason of section 1250(d).","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/a/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Reduction in percentage depletion"},{"t":"chapeau","text":"In the case of iron ore and coal (including lignite), the amount allowable as a deduction under section 613 with respect to any property (as defined in section 614) shall be reduced by 20 percent of the amount of the excess (if any) of\u2014"},{"t":"subpara","id":"/us/usc/t26/s291/a/2/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the amount of the deduction allowable under section 613 for the taxable year (determined without regard to this paragraph), over","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s291/a/2/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the adjusted basis of the property at the close of the taxable year (determined without regard to the depletion deduction for the taxable year).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/a/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Certain financial institution preference items"},{"t":"content","children":[{"t":"p","text":"The amount allowable as a deduction under this chapter (determined without regard to this section) with respect to any financial institution preference item shall be reduced by 20 percent.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/a/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Amortization of pollution control facilities"},{"t":"content","children":[{"t":"p","text":"If an election is made under section 169 with respect to any certified pollution control facility, the amortizable basis of such facility for purposes of such section shall be reduced by 20 percent.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s291/b","children":[{"t":"num","text":"(b)"},{"t":"heading","text":"Special rules for treatment of intangible drilling costs and mineral exploration and development costs"},{"t":"chapeau","text":"For purposes of this subtitle, in the case of a corporation\u2014"},{"t":"para","id":"/us/usc/t26/s291/b/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The amount allowable as a deduction for any taxable year (determined without regard to this section)\u2014"},{"t":"subpara","id":"/us/usc/t26/s291/b/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" under section 263(c) in the case of an integrated oil company, or","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s291/b/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" under section 616(a) or 617(a),","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"shall be reduced by 30 percent.","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/b/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Amortization of amounts not allowable as deductions under paragraph (1)"},{"t":"content","children":[{"t":"p","text":"The amount not allowable as a deduction under section 263(c), 616(a), or 617(a) (as the case may be) for any taxable year by reason of paragraph (1) shall be allowable as a deduction ratably over the 60-month period beginning with the month in which the costs are paid or incurred.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/b/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Dispositions"},{"t":"content","children":[{"t":"p","text":"For purposes of section 1254, any deduction under paragraph (2) shall be treated as a deduction allowable under section 263(c), 616(a), or 617(a) (whichever is appropriate).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/b/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Integrated oil company defined"},{"t":"content","children":[{"t":"p","text":"For purposes of this subsection, the term \u201cintegrated oil company\u201d means, with respect to any taxable year, any producer of crude oil to whom subsection (c) of section 613A does not apply by reason of paragraph (2) or (4) of section 613A(d).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/b/5","children":[{"t":"num","text":"(5)"},{"t":"heading","text":"Coordination with cost depletion"},{"t":"content","children":[{"t":"p","text":"The portion of the adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s291/c","children":[{"t":"num","text":"(c)"},{"t":"heading","text":"Special rules relating to pollution control facilities"},{"t":"chapeau","text":"For purposes of this subtitle\u2014"},{"t":"para","id":"/us/usc/t26/s291/c/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Accelerated cost recovery deduction"},{"t":"content","children":[{"t":"p","text":"Section 168 shall apply with respect to that portion of the basis of any property not taken into account under section 169 by reason of subsection (a)(4).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/c/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"1250 Recapture"},{"t":"content","children":[{"t":"p","text":"Subsection (a)(1) shall not apply to any section 1250 property which is part of a certified pollution control facility (within the meaning of section 169(d)(1)) with respect to which an election under section 169 was made.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s291/d","children":[{"t":"num","text":"(d)"},{"t":"heading","text":"Special rule for real estate investment trusts"},{"t":"content","children":[{"t":"p","text":"In the case of a real estate investment trust (as defined in section 856), the difference between the amounts described in subparagraphs (A) and (B) of subsection (a)(1) shall be reduced to the extent that a capital gain dividend (as defined in section 857(b)(3)(C),","children":[{"t":"ref","text":"1"},{"t":"num","text":"1","tail":"\u202fSee References in Text note below."},{"t":"text","text":"\u202fSee References in Text note below.","tail":" applied without regard to this section) is treated as paid out of such difference. Any capital gain dividend treated as having been paid out of such difference to a shareholder which is an applicable corporation retains its character in the hands of the shareholder as gain from the disposition of section 1250 property for purposes of applying subsection (a)(1) to such shareholder."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s291/e","children":[{"t":"num","text":"(e)"},{"t":"heading","text":"Definitions"},{"t":"chapeau","text":"For purposes of this section\u2014"},{"t":"para","id":"/us/usc/t26/s291/e/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Financial institution preference item"},{"t":"chapeau","text":"The term \u201cfinancial institution preference item\u201d includes the following:"},{"t":"subpara","id":"/us/usc/t26/s291/e/1/A","children":[{"t":"num","text":"[(A)"},{"t":"heading","text":"Repealed. Pub. L. 101\u2013508, title XI, \u00a7\u202f11801(c)(12)(B), Nov. 5, 1990, 104 Stat. 1388\u2013527]"},{"t":"content","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s291/e/1/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Interest on debt to carry tax-exempt obligations acquired after December 31, 1982, and before August 8, 1986"},{"t":"clause","id":"/us/usc/t26/s291/e/1/B/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"In the case of a financial institution which is a bank (as defined in section 585(a)(2)), the amount of interest on indebtedness incurred or continued to purchase or carry obligations acquired after ","children":[{"t":"text","text":"December 31, 1982","tail":", and before "},{"t":"text","text":"August 8, 1986","tail":", the interest on which is exempt from taxes for the taxable year, to the extent that a deduction would (but for this paragraph or section 265(b)) be allowable with respect to such interest for such taxable year."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s291/e/1/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"heading","text":"Determination of interest allocable to indebtedness on tax-exempt obligations"},{"t":"chapeau","text":"Unless the taxpayer (under regulations prescribed by the Secretary) establishes otherwise, the amount determined under clause (i) shall be an amount which bears the same ratio to the aggregate amount allowable (determined without regard to this section and section 265(b)) to the taxpayer as a deduction for interest for the taxable year as\u2014"},{"t":"subclause","id":"/us/usc/t26/s291/e/1/B/ii/I","children":[{"t":"num","text":"(I)"},{"t":"content","text":" the taxpayer\u2019s average adjusted basis (within the meaning of section 1016) of obligations described in clause (i), bears to","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s291/e/1/B/ii/II","children":[{"t":"num","text":"(II)"},{"t":"content","text":" such average adjusted basis for all assets of the taxpayer.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s291/e/1/B/iii","children":[{"t":"num","text":"(iii)"},{"t":"heading","text":"Interest"},{"t":"content","children":[{"t":"p","text":"For purposes of this subparagraph, the term \u201cinterest\u201d includes amounts (whether or not designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s291/e/1/B/iv","children":[{"t":"num","text":"(iv)"},{"t":"heading","text":"Application of subparagraph to certain obligations issued after August 7, 1986"},{"t":"content","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"For application of this subparagraph to certain obligations issued after ","children":[{"t":"text","text":"August 7, 1986","tail":", see section 265(b)(3). That portion of any obligation not taken into account under paragraph (2)(A) of section 265(b) by reason of paragraph (7) of such section shall be treated for purposes of this section as having been acquired on "},{"t":"text","text":"August 7, 1986","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s291/e/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Section 1245 and 1250 property"},{"t":"content","children":[{"t":"p","text":"The terms \u201csection 1245 property\u201d and \u201csection 1250 property\u201d have the meanings given such terms by sections 1245(a)(3) and 1250(c), respectively.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"text","text":"\n"},{"t":"text","text":"\n"}]}]}