§ 1.1502-26 — Consolidated dividends received deduction.

26 CFR § 1.1502-26

• Title: Title 26: Internal Revenue
• Part: Part 1: Income Taxes
• Source: eCFR (current through May 4, 2026)

Text

§ 1.1502-26 Consolidated dividends received deduction.

(a) In general. The consolidated dividends received deduction for the taxable year is the lesser of—

(1) The aggregate of the deduction of the members of the group allowable under sections 243(a)(1), 245(a) and (b), and 250 (computed without regard to the limitations provided in section 246(b)), or

(2) The aggregate amount described in section 246(b), determined by substituting, wherever it appears—

(i) The term consolidated taxable income for taxable income,

(ii) The term consolidated net operating loss for net operating loss, and

(iii) The term consolidated net capital loss for capital loss.

(b) Intercompany dividends. The deduction determined under paragraph (a) of this section is determined without taking into account intercompany dividends to the extent that, under § 1.1502-13(f)(2), they are not included in gross income. See § 1.1502-13 for additional rules relating to intercompany dividends.

(c) Examples. The provisions of this section may be illustrated by the following examples:

(1) Example 1. (i) Corporations P, S, and S-1 filed a consolidated return for the calendar year 2023 showing consolidated taxable income of $100,000 (determined without regard to the consolidated net operating loss deduction, and the consolidated dividends received deduction). These corporations received dividends during such year from less than 20-percent owned domestic corporations as follows:

Table 1 to Paragraph (c)(1)(i)

Corporation	Dividends
P	$6,000
S	10,000
S-1	34,000
Total	50,000

(ii) The dividends received deduction allowable to each member under section 243(a)(1) (computed without regard to the limitation in section 246(b)) is as follows: P has $3,000 (50 percent of $6,000), S has $5,000 (50 percent of $10,000), and S-1 has $17,000 (50 percent of $34,000), or a total of $25,000. Since $25,000 is less than $50,000 (50 percent of $100,000), the consolidated dividends received deduction is $25,000.

(2) Example 2. Assume the same facts as in paragraph (c)(1)(i) of this section (Example 1), except that consolidated taxable income (computed without regard to the consolidated net operating loss deduction and the consolidated dividends received deduction) was $40,000. The aggregate of the dividends received deductions, $42,500, computed without regard to section 246(b), results in a consolidated net operating loss of $2,500. See section 172(d)(5). Therefore, paragraph (a)(2) of this section does not apply and the consolidated dividends received deduction is $42,500.

[T.D. 6894, 31 FR 11794, Sept. 8, 1966, as amended by T.D. 7631, 44 FR 40497, July 11, 1979; T.D. 8597, 60 FR 36710, July 18, 1995; T.D. 8677, 61 FR 33323, June 27, 1996; T.D. 8823, 64 FR 36099, July 2, 1999; T.D. 10018, 89 FR 106868, Dec. 30, 2024]