CHAPTER 533 —CONSTRUCTION RESERVE FUNDS
§53301. Definitions
(a)
(1)
(2)
(A) a vessel—
(i) constructed in the United States after December 31, 1939, constructed with a construction-differential subsidy under title V of the Merchant Marine Act, 1936, or constructed with financing or a financing guarantee under
(ii) documented or agreed with the Secretary to be documented under the laws of the United States; and
(iii)(I) of a type, size, and speed that the Secretary determines is suitable for use on the high seas or Great Lakes in carrying out this subtitle, but not less than 2,000 gross tons or less than 12 knots speed unless the Secretary certifies in each case that a vessel of lesser tonnage or speed is desirable for use by the United States Government in case of war or national emergency; or
(II) constructed to replace a vessel bought or requisitioned by the Government; and
(B) a vessel reconstructed or reconditioned for use only on the Great Lakes, including the Saint Lawrence River and Gulf, if the Secretary finds that the reconstruction or reconditioning will promote the objectives of this subtitle.
(b)
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53301(a)(1) | 46 App.:1161(n). | June 29, 1936, ch. 858, title V, §511(n), as added Dec. 23, 1944, ch. 714, §2, |
| 53301(a) (2)(A) | 46 App.:1161(a). | June 29, 1936, ch. 858, title V, §511(a), as added Oct. 10, 1940, ch. 849, |
| 53301(a) (2)(B) | 46 App.:1161(o). | June 29, 1936, ch. 858, title V, §511(o), as added July 17, 1952, ch. 939, §14, |
| 53301(b) | 46 App.:1161(m). | June 29, 1936, ch. 858, title V, §511(m), as added Oct. 10, 1940, ch. 849, |
In subsection (a)(2)(A)(i), the words "constructed with a construction-differential subsidy under title V of the Merchant Marine Act, 1936, or constructed with financing or a financing guarantee under
Subsection (a)(2)(B) is substituted for the source provision to state more directly that a vessel described in the source provision is a new vessel for purposes of this chapter.
Editorial Notes
References in Text
The Merchant Marine Act, 1936, referred to in subsec. (a)(2)(A)(i), is act June 29, 1936, ch. 858,
§53302. Authority for construction reserve funds
(a)
(b)
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53302(a) | 46 App.:1161(b) (1st sentence words before 6th comma and between 10th and 16th commas). | June 29, 1936, ch. 858, title V, §511(b) (1st sentence words before 6th comma and between 10th and 16th commas, last sentence), as added Oct. 10, 1940, ch. 849, |
| 53302(b) | 46 App.:1161(b) (last sentence). |
In subsection (a), the words "necessary to carrying out the policy set forth in section 1101 of this Appendix" are omitted as unnecessary.
§53303. Persons eligible to establish funds
A construction reserve fund may be established by a citizen of the United States that—
(1) is operating a vessel in the foreign or domestic commerce of the United States or in the fisheries;
(2) owns, in whole or in part, a vessel being operated in the foreign or domestic commerce of the United States or in the fisheries;
(3) was operating a vessel in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the United States Government;
(4) owned, in whole or in part, a vessel being operated in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the Government; or
(5) had acquired or was having constructed a vessel to operate in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the Government.
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53303 | 46 App.:1161(b) (1st sentence words between 6th and 10th commas). | June 29, 1936, ch. 858, title V, §511(b) (1st sentence words between 6th and 10th commas), as added Oct. 10, 1940, ch. 849, |
§53304. Vessel ownership
In this chapter, a vessel is deemed to be constructed or acquired by a taxpayer if constructed or acquired by a corporation when the taxpayer owns at least 95 percent of each class of stock of the corporation.
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53304 | 46 App.:1161(l). | June 29, 1936, ch. 858, title V, §511(l), as added Oct. 10, 1940, ch. 849, |
§53305. Eligible fund deposits
A construction reserve fund may include deposits of—
(1) the proceeds from the sale of a vessel;
(2) indemnities for the loss of a vessel;
(3) earnings from the operation of a documented vessel and from services incident to the operation; and
(4) interest or other amounts accrued on deposits in the fund.
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53305 | 46 App.:1161(b) (1st sentence words after 16th comma). | June 29, 1936, ch. 858, title V, §511(b) (1st sentence words after 16th comma), as added Oct. 10, 1940, ch. 849, |
In paragraph (3), the words "documented vessel" are substituted for "vessels documented under the laws of the United States" because of the definition of "documented vessel" in
In paragraph (4), the words "interest or other amounts accrued on deposits in the fund" are substituted for "receipts, in the form of interest or otherwise, with respect to amounts previously deposited" for clarity and to eliminate unnecessary words.
§53306. Recognition of gain for tax purposes
(a)
(1) the adjusted basis of the vessel; and
(2) the amount of gain the taxpayer would recognize without regard to this section.
(b)
(1) deposits an amount equal to the net proceeds of the sale or the net indemnity for the loss in a construction reserve fund within 60 days after receiving the payment of proceeds or indemnity; and
(2) elects under this section not to recognize the gain.
(c)
(1)
(2)
(d)
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53306 | 46 App.:1161(c). | June 29, 1936, ch. 858, title V, §511(c), as added Oct. 10, 1940, ch. 849, |
In subsection (c)(2), the words "in any taxable year beginning after December 31, 1939" are omitted as obsolete. The words "prescribed by the Secretary of the Treasury" are substituted for "prescribed by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury" for consistency in the revised title and with other titles of the United States Code. See
§53307. Basis for determining gain or loss and for depreciating new vessels
Under the income or excess profits tax laws of the United States, the basis for determining a gain or loss and for depreciation of a new vessel constructed, reconstructed, reconditioned, or acquired by the taxpayer, or for which purchase-money indebtedness is liquidated as provided in
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53307 | 46 App.:1161(d). | June 29, 1936, ch. 858, title V, §511(d), as added Oct. 10, 1940, ch. 849, |
§53308. Order and proportions of deposits and withdrawals
In this chapter—
(1) if the net proceeds of a sale or the net indemnity for a loss is deposited in more than one deposit, the amount consisting of the gain shall be deemed to be deposited first;
(2) amounts expended, obligated, or otherwise withdrawn shall be applied against the amounts deposited in the fund in the order of deposit; and
(3) if a deposit consists in part of a gain not recognized under
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53308 | 46 App.:1161(e). | June 29, 1936, ch. 858, title V, §511(e), as added Oct. 10, 1940, ch. 849, |
§53309. Accumulation of deposits
For any taxable year, amounts on deposit in a construction reserve fund on the last day of the taxable year, for which the requirements of
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53309 | 46 App.:1161(f). | June 29, 1936, ch. 858, title V, §511(f), as added Oct. 10, 1940, ch. 849, |
The words "are deemed to have been retained for the reasonable needs of the business within the meaning of section 537(a) of the Internal Revenue Code of 1986 (
§53310. Obligation of deposits and period for construction of certain vessels
(a)
(1)(A) a contract is made for the construction or acquisition of a new vessel or, with the approval of the Secretary of Transportation, for a part interest in a new vessel or for the reconstruction or reconditioning of a new vessel;
(B) the deposit is expended or obligated for expenditure under that contract;
(C) at least 12.5 percent of the construction or contract price of the vessel is paid or irrevocably committed for payment; and
(D) the plans and specifications for the vessel are approved by the Secretary to the extent the Secretary considers necessary; or
(2) the deposit is expended or obligated for expenditure for the liquidation of existing or subsequently incurred purchase-money indebtedness to a person not a parent company of, or a company affiliated or associated with, the mortgagor on a new vessel.
(b)
(1) at least 5 percent of the construction (or, if the contract covers more than one vessel, at least 5 percent of the construction of the first vessel) must be completed within 6 months after the date of the construction contract (or within the period of an extension under subsection (c)), as estimated by the Secretary and certified by the Secretary to the Secretary of the Treasury; and
(2) construction under the contract must be completed with reasonable dispatch thereafter.
(c)
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53310(a) | 46 App.:1161(g) (less (1)(B)). | June 29, 1936, ch. 858, title V, §511(g), (h), as added Oct. 10, 1940, ch. 849, |
| 53310(b) | 46 App.:1161(g)(1)(B). | |
| 53310(c) | 46 App.:1161(h). |
In this section, the language about joint regulations in 46 App. U.S.C. 1161(g) and (h) is omitted as unnecessary because of section 53302(b) of the revised title.
In subsection (a), the words "(i) two years from the date of deposit or the date of any extension thereof which may be granted by the Secretary of Transportation pursuant to the provisions of subsection (h) of this section, in the case of deposits made prior to the date on which these amendatory provisions become effective, or" in 46 App. U.S.C. 1161(g)(1) and (2) are omitted as obsolete. In paragraph (1)(A), the words "or, with the approval of the Secretary of Transportation, for a part interest in a new vessel or for the reconstruction or reconditioning of a new vessel" are substituted for "(or in the discretion of the Secretary of Transportation, for a part interest therein), or, with the approval of the Secretary of Transportation, for the reconstruction or reconditioning of a new vessel or vessels" to eliminate unnecessary words.
In subsection (c), the proviso in 46 App. U.S.C. 1161(h) is omitted as obsolete.
§53311. Taxation of deposits on failure of conditions
A deposited gain, if otherwise taxable income under the law applicable to the taxable year in which the gain was realized, shall be included in gross income for that taxable year, except for purposes of the declared value excess profits tax and the capital stock tax, if—
(1) the deposited gain is not expended or obligated within the appropriate period under
(2) the deposited gain is withdrawn before the end of that period;
(3) the construction related to that deposited gain has not progressed to the extent of 5 percent of completion within the appropriate period under
(4) the Secretary of Transportation finds and certifies to the Secretary of the Treasury that, for causes within the control of the taxpayer, the entire construction related to that deposited gain is not completed with reasonable dispatch.
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53311 | 46 App.:1161(i). | June 29, 1936, ch. 858, title V, §511(i), as added Oct. 10, 1940, ch. 849, |
The last sentence of 46 App. U.S.C. 1161(i) is omitted as obsolete.
§53312. Assessment and collection of deficiency tax
Notwithstanding any other provision of law, a deficiency in tax for a taxable year resulting from the inclusion of an amount in gross income as provided by
(
| Revised Section | Source (U.S. Code) | Source (Statutes at Large) |
|---|---|---|
| 53312 | 46 App.:1161(j). | June 29, 1936, ch. 858, title V, §511(j), as added Oct. 10, 1940, ch. 849, |