Page:United States Statutes at Large Volume 120.djvu/1694

 PUBLIC LAW 109–304—OCT. 6, 2006

120 STAT. 1663

‘‘(2) within 5 days of the actual date of delivery of the new vessel to the owner. ‘‘§ 57305. Determination of trade-in allowance ‘‘(a) IN GENERAL.—The Secretary of Transportation shall determine the trade-in allowance for an obsolete vessel at the time of acquisition of the vessel. The allowance shall be the fair value of the vessel. In determining the value, the Secretary shall consider— ‘‘(1) the scrap value of the obsolete vessel in American and foreign markets; ‘‘(2) the depreciated value based on a 20-year or 25-year life, whichever applies to the obsolete vessel; and ‘‘(3) the market value of the obsolete vessel for operation in world commerce or in the domestic or foreign commerce of the United States. ‘‘(b) USE OF OBSOLETE VESSELS.—If acquisition of the obsolete vessel occurs when the owner contracts for the construction of the new vessel, and the owner uses the obsolete vessel during the period of construction of the new vessel, the Secretary shall reduce the trade-in allowance by an amount representing the fair value of that use. The Secretary shall establish the rate for use of the obsolete vessel when the contract for construction of the new vessel is made. ‘‘§ 57306. Payment of trade-in allowance ‘‘(a) ACQUISITION AT TIME OF CONTRACT.—If acquisition of an obsolete vessel under this chapter occurs when the owner contracts for the construction or purchase of the new vessel, the Secretary of Transportation shall apply the trade-in allowance to the purchase price of the new vessel rather than paying it to the owner. If the new vessel is constructed under this subtitle, the Secretary may apply the trade-in allowance to the required cash payments on terms and conditions the Secretary may prescribe. If the new vessel is not constructed under this subtitle, the Secretary shall pay the trade-in allowance to the builder of the vessel for the account of the owner when the Secretary acquires the obsolete vessel. ‘‘(b) ACQUISITION AT TIME OF DELIVERY.—If acquisition of the obsolete vessel occurs when the new vessel is delivered to the owner, the Secretary shall deposit the trade-in allowance in the owner’s capital construction fund. ‘‘§ 57307. Recognition of gain for tax purposes ‘‘The owner of an obsolete vessel does not recognize a gain under the Federal income tax laws when the vessel is transferred to the Secretary of Transportation in exchange for a trade-in allowance under this chapter. The basis of the new vessel acquired with the allowance is the same as the basis of the obsolete vessel— ‘‘(1) increased by the difference between the cost of the new vessel and the trade-in allowance of the obsolete vessel; and ‘‘(2) decreased by the amount of loss recognized on the transfer.

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