# Prop. Treas. Reg. § 1.861-3: Dividends.

Proposed regulation, not in force. REG-133673-15, 81 FR 21795, published 2016-04-13 <https://www.federalregister.gov/documents/2016/04/13/2016-08248/deemed-distributions-under-section-305c-of-stock-and-rights-to-acquire-stock>. Interprets 26 U.S.C. § 861.

Par. 6. Section 1.861-3 is amended by: 1. In paragraph (a)(6), removing “A substitute dividend payment is a payment” in the first sentence and adding “A substitute dividend payment is a payment or a deemed payment” in its place, and adding a new second sentence. 2. In paragraph (d), replacing the third sentence with a new sentence. The additions read as follows:

(a) * * * * *

(6) Substitute dividend payments. * * * A deemed payment is a payment deemed to have been made in the amount (as determined under § 1.305-7(c)(4)) of a deemed distribution (as defined in § 1.305-1(d)(7)) that the owner of the transferred security is entitled to during the term of the transaction. * * *

* * * * *

(d) Effective/applicability date. * * * Paragraph (a)(6) of this section applies to payments made on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register ; however, a taxpayer may rely on the rule in the second sentence of paragraph (a)(6) of this section for all deemed distributions (as defined in § 1.305-1(d)(7)) occurring on or after January 1, 2016, until the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register . * * *