Page:United States Statutes at Large Volume 100 Part 3.djvu/405

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2213

close of the 26th, 27th, 28th, 29th, or 30th taxable year following the taxable year for which such a m o u n t was deposited shall be treated as a nonqualified withdrawal in accordance with the following table: "If the amount remains in the fund at the close of the— 26th taxable year 27th taxable year 28th taxable year 29th taxable year 30th taxable year

The applicable percentage is— 20 percent 40 percent 60 percent 80 percent 100 percent.

"(B) E A R N I N G S TREATED AS DEPOSITS.—The e a r n i n g s of any

capital construction fund for any taxable year (other than net gains) shall be t r e a t e d for purposes of this paragraph as an a m o u n t deposited for such taxable year. "(C) A M O U N T S COMMITTED TREATED AS W I T H D R A W N. — For

purposes of subparagraph (A), a n a m o u n t shall not be treated a s r e m a i n i n g in a capital construction fund a t the close of any taxable year to the extent the r e is a binding contract a t the close of such year for a qualified withdrawal of such a m o u n t with respect to a n identified item for which such withdrawal may be made. "(D) AUTHORITY TO TREAT EXCESS FUNDS AS W I T H D R A W N. —

If the Secretary determines that the balance in any capital construction fund exceeds the a m o u n t which is a p p r o p r i a t e to meet the vessel construction program objectives of the person who established such fund, the a m o u n t of such excess shall be treated as a nonqualified withdrawal under subparagraph (A) unless such person develops appropriate program objectives within 3 years to dissipate such excess. "(E) A M O U N T S IN FUND ON JANUARY i, 1987.—For pur-

poses of this paragraph, all a m o u n t s in a capital construction fund on January 1, 1987, shall be t r e a t e d a s deposited in such fund on such date. "(6) NONQUALIFIED GINAL RATE.—

WITHDRAWALS

TAXED AT HIGHEST

MAR-

"(A) IN GENERAL.—In the case of any taxable year for which the r e is a nonqualified withdrawal (including any a m o u n t so treated under paragraph (5)), the tax imposed by chapter 1 shall be determined— "(i) by excluding such withdrawal from gross income, and "(ii) by increasing the tax imposed by chapter 1 by the product of the a m o u n t of such withdrawal and the highest r a t e of tax specified in section 1 (section 11 in the case of a corporation). With respect to the portion of any nonqualified withdrawal made out of the capital gain account during a taxable year to which section l(i) or 1201(a) applies, the r a t e of tax t a k e n into account under the preceding sentence shall not exceed 28 percent (34 percent in the case of a corporation). "(B) T A X BENEFIT RULE.—If any portion of a nonqualified

withdrawal is properly a t t r i b u t a b l e to deposits (other than earnings on deposits) made by the tax p a y e r in any taxable year which did not reduce the tax p a y e r ' s liability for \x under chapter 1 for any taxable year preceding the taxable year in which such withdrawal occurs—

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