Page:United States Statutes at Large Volume 54 Part 1.djvu/1140

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PUBLIC LAWS-CH. 849-OCT. 10, 1940 [CHAPTER 849] October 10, 1940 [H. R. 9581] [Public, No. 840] Merchant Marine Act, 196, amendment. 49 Stat. 1995. 46U.S.C., Supp.V, i§ 1151-1160 . "New vessel" de- fined. 49 Stat. 1995, 2008 . 46U. S. C ., Supp. V, §§1151-1160,1191-1204 . 52 Stat. 969. 46U.S.C., Supp.V, §§ 1271-1279. Citizens operating vessels in U. S . com- merce, fisheries, etc. 49 Stat. 1985. 46U. aS..,Supp.V, S1101. Construction re- serve fund. Depositsof proceeds or indemnities in re- serve fund. Time limitation for deposits; exception. " Net proceeds" and "net indemnity" de fined. Basis for determin- ing gain or loss and depreciation. [54 STAT. AN ACT To amend the Merchant Marine Act, 1936, as amended. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That title V of the Merchant Marine Act, 1936, as amended, is hereby amended by adding at the end thereof a new section to read as follows: "SEC. 511. (a) When used in this section the term 'new vessel' means any vessel (1) documented or agreed with the Commission to be documented under the laws of the United States; (2) constructed in the United States after December 31, 1939, or the construction of which has been financed under titles V or VII of this Act, as amended, or the construction of which has been aided by a mortgage insured under title XI of this Act as amended; and (3) either (A) of such type, size, and speed as the Commission shall determine to be suitable for use on the high seas or Great Lakes in carrying out the purposes of this Act, but not of less than two thousand gross tons or of less speed than twelve knots, unless the Commission shall deter- mine and certify in each case that a vessel of a specified lesser tonnage or speed is desirable for use by the United States in case of war or national emergency, or (B) constructed to replace a vessel or vessels requisitioned or purchased by the United States. (b) For the purposes of promoting the construction of vessels necessary to carrying out the policy set forth in title I of this Act, any citizen of the United States who is operating a vessel or vessels in the foreign or domestic commerce of the United States or in the fisheries or owns a vessel or vessels being so operated, or who, at the time of purchase or requisition of the vessel by the Government, was operating a vessel or vessels so engaged or owned a vessel or vessels being so operated, may establish a construction reserve fund, for the construction or acquisition of new vessels, to be composed of deposits of proceeds from sales of vessels, indemnities on account of losses of vessels, earnings from the operation of vessels, and receipts, in the form of interest or otherwise, with respect to amounts previously deposited. Such construction reserve fund shall be established, main- tained, expended, and used in accordance with the provisions of this section and rules or regulations to be prescribed jointly by the Commission and the Secretary of the Treasury. "(c) In the case of the sale or actual or constructive total loss of a vessel, if the taxpayer deposits an amount equal to the net proceeds of the sale or to the net indemnity with respect to the loss in a con- struction reserve fund established under subsection (b), then, if the taxpayer so elects in his income-tax return for the taxable year in which the gain was realized, no gain shall be recognized to the tax- payer in respect of such sale or indemnification in the computation of net income for the purposes of Federal income or excess-profits taxes. For the purposes of this subsection no amount shall be considered as deposited in a construction reserve fund unless it is deposited within sixty days after it is received by the taxpayer except that in the case of amounts received on or before the date of enactment of this section or within sixty days after such date, the deposit may be made within one hundred and twenty days after the date of enactment of this section. As used in this subsection the term 'net proceeds' and the term 'net indemnity' mean the sum of (1) the adjusted basis of the vessel and (2) the amount of gain which would be recognized to the taxpayer without regard to this subsection. "(d) The basis for determining gain or loss and for depreciation, for the purpose of Federal income or excess-profits taxes, of any new 1106