PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2209
"(1) IN GENERAL.—Amounts in any capital construction fund shall be kept in the depository or depositories specified in the agreement and shall be subject to such trustee and other fiduciary requirements as may be specified by the Secretary. "(2) LIMITATION ON FUND INVESTMENTS.—Amounts in any capital construction ftind may be invested only in interest-bearing securities approved by the Secretary; except that, if such Secretary consents thereto, an agreed percentage (not in excess of 60 percent) of the assets of the fund may be invested in the stock of domestic corporations. Such stock must be currently fully listed and registered on an exchange registered with the Securities and Exchange Commission as a national securities exchange, and must be stock which would be acquired by prudent men of discretion and intelligence in such matters who are seeking a reasonable income and the preservation of their capital. If at any time the fair market value of the stock in the fund is more than the agreed percentage of the assets in the fund, any subsequent investment of amounts deposited in the fund, and any subsequent withdrawal from the fund, shall be made in such a way as to tend to restore the fund to a situation in which the fair market value of the stock does not exceed such agreed percentage. "(3) INVESTMENT IN CERTAIN PREFERRED STOCK PERMITTED.—
For purposes of this subsection, if the common stock of a corporation meets the requirements of this subsection and if the preferred stock of such corporation would meet such requirements but for the fact that it cannot be listed and registered as required because it is nonvoting stock, such preferred stock shall be treated as meeting the requirements of this subsection. "(c) NONTAXABILITY FOR DEPOSITS.—
"(1) IN GENERAL.—For purposes of this title— "(A) taxable income (determined without regard to this section and section 607 of the Merchant Marine Act, 1936) for the taxable year shall be reduced by an amount equal to the amount deposited for the taxable year out of amounts referred to in subsection (a)(1)(A), "(B) gain from a transaction referred to in subsection ^ (a)(1)(C) shall not be taken into account if an amount equal to the net proceeds (as defined in joint regulations) from such transaction is deposited in the fund, "(C) the earnings (including gains and losses) from the investment and reinvestment of amounts held in the fund shall not be taken into account, "(D) the earnings and profits (within the meaning of section 316) of any corporation shall be determined without regard to this section and section 607 of the Merchant Marine Act, 1936, and "(E) in applying the tax imposed by section 531 (relating to the accumulated earnings tax), amounts while held in the fund shall not be taken into account. "(2) ONLY QUALIFIED DEPOSITS ELIGIBLE FOR TREATMENT.—Para-
graph (1) shall apply with respect to any amount only if such amount is deposited in the fund pursuant to the agreement and not later than the time provided in joint regulations. "(d) ESTABLISHMENT OF ACCOUNTS.—For purposes of this section— "(1) IN GENERAL.—Within a capital construction fund 3 accounts shall be maintained:
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