§1359 — Title 26 Internal Revenue Code | U.S. Code

Summary

You can choose not to report (defer) the profit from selling a qualifying vessel if you buy a replacement qualifying vessel within a set time. That time starts one year before you sell and ends either 3 years after the end of the first tax year when you have the gain or a later date the IRS allows if you ask. You must still report any part of the sale proceeds that is more than the cost of the replacement. The rule applies to anyone who would count as a qualifying vessel operator if they were a corporation. If you make this choice, you must tell the IRS about the new vessel or say you will not replace it in the way the IRS requires. The IRS then has 3 years from that notice to assess any tax because of the deferred gain. The tax basis of the replacement vessel is its cost reduced by the amount of the gain you did not report. If you buy several items, that reduced basis is split among them by cost.

Title 26, §1359

Internal Revenue Code — Source: USLM XML via OLRC

(a)If any qualifying vessel operator sells or disposes of any qualifying vessel in an otherwise taxable transaction, at the election of such operator, no gain shall be recognized if any replacement qualifying vessel is acquired during the period specified in subsection (b), except to the extent that the amount realized upon such sale or disposition exceeds the cost of the replacement qualifying vessel.

(b)The period referred to in subsection (a) shall be the period beginning one year prior to the disposition of the qualifying vessel and ending—

(1)3 years after the close of the first taxable year in which the gain is realized, or

(2)subject to such terms and conditions as may be specified by the Secretary, on such later date as the Secretary may designate on application by the taxpayer.

(c)For purposes of this section, the term “qualifying vessel operator” includes any person who would be a qualifying vessel operator were such person a corporation.

(d)If a qualifying vessel operator has made the election provided in subsection (a), then—

(1)the statutory period for the assessment of any deficiency, for any taxable year in which any part of the gain is realized, attributable to such gain shall not expire prior to the expiration of 3 years from the date the Secretary is notified by such operator (in such manner as the Secretary may by regulations prescribe) of the replacement qualifying vessel or of an intention not to replace, and

(2)such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of section 6212(c) or the provisions of any other law or rule of law which would otherwise prevent such assessment.

(e)In the case of any replacement qualifying vessel purchased by the qualifying vessel operator which resulted in the nonrecognition of any part of the gain realized as the result of a sale or other disposition of a qualifying vessel, the basis shall be the cost of the replacement qualifying vessel decreased in the amount of the gain not so recognized; and if the property purchased consists of more than one piece of property, the basis determined under this sentence shall be allocated to the purchased properties in proportion to their respective costs.

Statutory Notes and Related Subsidiaries

Effective Date

Section applicable to taxable years beginning after Oct. 22, 2004, see section 248(c) of Pub. L. 108–357, set out as an

Effective Date

of 2004

Amendments

note under section 56 of this title.

§1359 Disposition of qualifying vessels

Summary

Title 26, §1359

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Amendments

Citations & Metadata