Rev. Rul. 78-296

ISSUE

For purposes of the personal holding company consent dividends procedure, does the phrase "due date" appearing in section 1.565-1(b)(3) of the Income Tax Regulations include extensions of time for filing the corporation's federal income tax return?

FACTS

On September 12, 1978, all the shareholders of X Corporation, a personal holding company, signed consent dividend Forms 972 agreeing to include in income as a dividend certain specified amounts. On September 15, 1978, X filed its federal income tax return for the calendar year 1977 with the Forms 972 executed by its shareholders and Form 973 (Corporation Claim for Deduction for Consent Dividends) executed by X. X had received an extension of time from March 15, 1978, to September 15, 1978, to file its federal income tax return.

LAW AND ANALYSIS

Section 565 of the Internal Revenue Code of 1954 provides that if any person owns consent stock, as defined in section 565(f), in a corporation on the last day of the taxable year of such corporation, and that person agrees, in a consent (Form 972) filed with the return of the corporation to treat as a dividend the amount specified in the consent, the amount specified shall constitute a consent dividend for purposes of section 561 relating to the deduction for dividends paid.

Section 1.565-1(b)(3) of the regulations provides that a consent may be filed at any time not later than the due date of the corporation's income tax return for the taxable year for which the dividends paid deduction is claimed. With such return and not later than the due date thereof, the corporation must file Forms 972 and a Form 973.

Because section 565 of the Code requires consents (Forms 972) to be filed with the corporation's return, such consents must be filed with the return even if such return is filed pursuant to an extension of the time to file.

HOLDING

The phrase "due date" appearing in section 1.565-1(b)(3) of the regulations includes extensions of time for filing the corporation's federal income tax return.