Page:United States Statutes at Large Volume 84 Part 1.djvu/1088

 1030

26 USC m 1* °

68A Stat. 817. 26 USC 6601. 83 Stat. 727. 26 USC 6651.

PUBLIC LAW 91-469-OCT. 21, 1970

[84 STAT,

vessel, barge, or container shall be reduced by an amount equal to— "(A) Five-eighths of such portion, in the case of a corporation (other than an electing small business corporation, as defined in section 1371 of the Internal Revenue Code of 1954), or "(B) One-half of such portion, in the case of any other person. " (4) If any portion of a qualified withdrawal to pay the principal on any indebtedness is made out of the ordinary income account or the capital gain account, then an amount equal to the aggregate reduction which would be required by paragraphs (2) and (3) if this were a qualified withdrawal for a purpose described in such paragraphs shall be applied, in the order provided in joint regulations, to reduce the basis of vessels, barges, and containers owned by the person maintaining the fund. Any amount of a withdrawal remaining after the application of the preceding sentence shall be treated as a nonqualified withdrawal. "(5) If any property the basis of which was reduced under paragraph (2), (3), or (4) IS disposed of, any gain realized on such disposition, to the extent it does not exceed the aggregate reduction in the basis of such property under such paragraphs, shall be treated as an amount referred to in subsection (h)(3)(A) which was withdrawn on the date of such disposition. Subject to such conditions and requirements as may be provided in joint regulations, the preceding sentence shall not apply to a disposition where there is a redeposit in an amount determined under joint regulations which will, insofar as practicable, restore the fund to the position it was in before the withdrawal. " (h) Tax Treatment of Nonc[ualified Withdrawals. "(1) Except as provided in subsection (i), any withdrawal from a fund which is not a qualified withdrawal shall be treated as a nonqualified withdrawal. "(2) Any nonqualified withdrawal from a fund shall be treated— " (A) first as made out of the ordinary income account, "(B) second as made out of the capital gain account, and "(C) third as made out of the capital account. For purposes of this section, items withdrawn from any account shall be treated as withdrawn on a first-in-first-out basis; except that (i) any nonqualified withdrawal for research, development, and design expenses incident to new and advanced ship design, machinery and equipment, and (ii) any amount treated as a nonqualified withdrawal under the secona sentence of subsection (g)(4), shall be treated as withdrawn on a last-in-first-out basis. " (3) For purposes of the Internal Revenue Code of 1954— "(A) any amount referred to in paragraph (2)(A) shall be included in income as an item of ordinary income for the taxable year in which the withdrawal is made, "(B) any amount referred to in paragraph (2)(B) shall be includeld in income for the taxable year in which the withdrawal is made as an item of gain realized during such year from the disposition of an asset held for more than 6 months, and "(C) for the period on or before the last date prescribed for payment of tax for the taxable year in which this withdrawal is made— " (i) no iiitcrest shall be payable under section 6601 of such Q ^ g ^^^ j^Q addition to the tax shall be payable under section 6651 of such Code, cc^jjj interest on the amount of the additional tax attributable to any item referred to in subparagraph (A) or (B) shall be paid at the applicable rate (as defined in paragraph

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