---
kind: "section"
citation: "26 U.S.C. § 565"
title: "26"
title_heading: "Internal Revenue Code"
number: "565"
heading: "Consent dividends"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/565"
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"
---

# §565. Consent dividends

- (a) **General rule—** If any person owns consent [stock](/usc/26/1504.md?p=a-4) (as defined in [subsection (f)(1)](#f-1)) in a corporation on the last day of the taxable year of such corporation, and such person agrees, in a consent filed with the return of such corporation in accordance with regulations prescribed by the Secretary, to treat as a [dividend](/usc/26/316.md?p=a) the amount specified in such consent, the amount so specified shall, except as provided in [subsection (b)](#b), constitute a consent [dividend](/usc/26/316.md?p=a) for purposes of [section 561](/usc/26/561.md) (relating to the deduction for [dividends](/usc/26/316.md?p=a) paid).
- (b) **Limitations—** A consent [dividend](/usc/26/316.md?p=a) shall not include—
  - (1) an amount specified in a consent which, if distributed in money, would constitute, or be part of, a distribution which would be disqualified for purposes of the [dividends](/usc/26/316.md?p=a) paid deduction under [section 562(c)](/usc/26/562.md?p=c) (relating to preferential [dividends](/usc/26/316.md?p=a)), or
  - (2) an amount specified in a consent which would not constitute a [dividend](/usc/26/316.md?p=a) (as defined in [section 316](/usc/26/316.md)) if the total amounts specified in consents filed by the corporation had been distributed in money to shareholders on the last day of the taxable year of such corporation.
- (c) **Effect of consent—** The amount of a consent [dividend](/usc/26/316.md?p=a) shall be considered, for purposes of this title—
  - (1) as distributed in money by the corporation to the shareholder on the last day of the taxable year of the corporation, and
  - (2) as contributed to the capital of the corporation by the shareholder on such day.
- (d) **Consent dividends and other distributions—** If a distribution by a corporation consists in part of consent [dividends](/usc/26/316.md?p=a) and in part of money or other [property](/usc/26/317.md?p=a), the entire amount specified in the consents and the amount of such money or other [property](/usc/26/317.md?p=a) shall be considered together for purposes of applying this title.
- (e) **Nonresident aliens and foreign corporations—** In the case of a consent [dividend](/usc/26/316.md?p=a) which, if paid in money would be subject to the provisions of [section 1441](/usc/26/1441.md) (relating to withholding of tax on nonresident aliens) or [section 1442](/usc/26/1442.md) (relating to withholding of tax on foreign corporations), this section shall not apply unless the consent is accompanied by money, or such other medium of payment as the Secretary may by regulations authorize, in an amount equal to the amount that would be required to be deducted and withheld under sections [1441](/usc/26/1441.md) or [1442](/usc/26/1442.md) if the consent [dividend](/usc/26/316.md?p=a) had been, on the last day of the taxable year of the corporation, paid to the shareholder in money as a [dividend](/usc/26/316.md?p=a). The amount accompanying the consent shall be credited against the tax imposed by this subtitle on the shareholder.
- (f) **Definitions—**
  - (1) **Consent stock—** Consent [stock](/usc/26/1504.md?p=a-4), for purposes of this section, means the class or classes of [stock](/usc/26/1504.md?p=a-4) entitled, after the payment of preferred [dividends](/usc/26/316.md?p=a), to a share in the distribution (other than in complete or partial liquidation) within the taxable year of all the remaining earnings and profits, which share constitutes the same proportion of such distribution regardless of the amount of such distribution.
  - (2) **Preferred dividends—** Preferred [dividends](/usc/26/316.md?p=a), for purposes of this section, means a distribution (other than in complete or partial liquidation), limited in amount, which must be made on any class of [stock](/usc/26/1504.md?p=a-4) before a further distribution (other than in complete or partial liquidation) of earnings and profits may be made within the taxable year.

## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 200; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)

## Notes

### Editorial Notes

### Amendments

1976—Subsecs. (a), (e). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.