exceed its ratable portion of the total excess dividends (if any) for such taxable year. (C) Total excess dividends For purposes of this paragraph— (i) In general The term total excess dividends means, with respect to stock in a C corporation described in subparagraph (B), the excess (if any) of— (I) the amount of the dividends in respect of such stock received by the taxpayer during the taxable year, over (II) 125 percent of the average amount of dividends received in respect of such stock by the taxpayer during the 3 preceding taxable years (or, if shorter, the portion of the taxpayer’s holding period before the taxable year). (ii) No excess for 1st year Except as provided by the Secretary, the total excess dividends with respect to any stock shall be zero for the taxable year in which the taxpayer’s holding period in such stock begins. (D) Adjustments Under regulations prescribed by the Secretary— (i) determinations under this paragraph shall be made on a share-by-share basis, except that shares with the same holding period may be aggregated and other shares may be aggregated to the extent provided by the Secretary, (ii) proper adjustments shall be made for stock splits and stock dividends, (iii) if the taxpayer does not hold the stock during the entire taxable year, dividends received during such year shall be annualized, and (iv) if the taxpayer’s holding period includes periods during which the stock was held by 1 or more other persons, dividends with respect to such stock received by such other person shall be taken into account as if received by the taxpayer. (2) Capital gain dividends of certain REITS (A) In general For purposes of applying this section, if an applicable taxpayer holds directly (or indirectly through 1 or more nontradable interests) stock in a real estate investment trust which is a nontradable covered asset, any capital gain dividend received by such taxpayer from such entity shall be treated as gain from an applicable transfer of a nontradable covered asset occurring on the date such