---
kind: "section"
citation: "26 U.S.C. § 564"
title: "26"
title_heading: "Internal Revenue Code"
number: "564"
heading: "Dividend carryover"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/564"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter G — Corporations Used to Avoid Income Tax on Shareholders"
  - "Part IV — Deduction for Dividends Paid"
---

# §564. Dividend carryover

- (a) **General rule—** For purposes of computing the [dividends](/usc/26/316.md?p=a) paid deduction under [section 561](/usc/26/561.md), in the case of a [personal holding company](/usc/26/542.md?p=a) the [dividend](/usc/26/316.md?p=a) carryover for any taxable year shall be the [dividend](/usc/26/316.md?p=a) carryover to such taxable year, computed as provided in [subsection (b)](#b), from the two preceding taxable years.
- (b) **Computation of dividend carryover—** The [dividend](/usc/26/316.md?p=a) carryover to the taxable year shall be determined as follows:
  - (1) For each of the 2 preceding taxable years there shall be determined the [taxable income](/usc/26/63.md?p=a) computed with the adjustments provided in [section 545](/usc/26/545.md) (whether or not the [taxpayer](/usc/26/1313.md?p=b) was a [personal holding company](/usc/26/542.md?p=a) for either of such preceding taxable years), and there shall also be determined for each such year the deduction for [dividends](/usc/26/316.md?p=a) paid during such year as provided in [section 561](/usc/26/561.md) (but determined without regard to the [dividend](/usc/26/316.md?p=a) carryover to such year).
  - (2) There shall be determined for each such taxable year whether there is an excess of such [taxable income](/usc/26/63.md?p=a) over such deduction for [dividends](/usc/26/316.md?p=a) paid or an excess of such deduction for [dividends](/usc/26/316.md?p=a) paid over such [taxable income](/usc/26/63.md?p=a), and the amount of each such excess.
  - (3) If there is an excess of such deductions for [dividends](/usc/26/316.md?p=a) paid over such [taxable income](/usc/26/63.md?p=a) for the first preceding taxable year, such excess shall be allowed as a [dividend](/usc/26/316.md?p=a) carryover to the taxable year.
  - (4) If there is an excess of such deduction for [dividends](/usc/26/316.md?p=a) paid over such [taxable income](/usc/26/63.md?p=a) for the second preceding taxable year, such excess shall be reduced by the amount determined in [paragraph (5)](#b-5), and the remainder of such excess shall be allowed as a [dividend](/usc/26/316.md?p=a) carryover to the taxable year.
  - (5) The amount of the reduction specified in [paragraph (4)](#b-4) shall be the amount of the excess of the [taxable income](/usc/26/63.md?p=a), if any, for the first preceding taxable year over such deduction for [dividends](/usc/26/316.md?p=a) paid, if any, for the first preceding taxable year.

## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 200; Pub. L. 94–455, title XIX, § 1901(a)(81), Oct. 4, 1976, 90 Stat. 1778.)

## Notes

### Editorial Notes

### Amendments

1976—Subsec. (c). Pub. L. 94–455 struck out subsec. (c) which related to the determination of dividend carryover from taxable years to which this subtitle does not apply.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1976 Amendment

Amendment by Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.