§53510 Tax treatment of qualified withdrawals and basis of property

Summary

Treat qualified withdrawals from a capital construction fund as coming first from the capital account, then from the capital gain account, and last from the ordinary income account. If money used to buy a vessel, barge, or container came from the ordinary income or capital gain accounts, reduce that vessel’s tax basis by the same amount. If a withdrawal to pay loan principal includes amounts from those accounts, apply the same basis reductions to vessels, barges, and containers owned by the fund owner in the order set by joint regulations; any leftover amount is a nonqualified withdrawal. If property whose basis was reduced is later sold, any gain up to the total basis reduction is treated as a withdrawal under section 53511(c)(1) on the sale date, unless a redeposit allowed by regulations restores the fund.