§1357 Items Not Subject to Regular Tax; Depreciation; Interest

Summary

If a corporation chooses this tax option, it does not have to count income from qualifying shipping activities as taxable income. A corporation that is part of an electing group also does not count its own qualifying shipping income. Losses, most deductions, and tax credits tied to that excluded shipping income are not allowed. But when you figure gain on a qualifying vessel, you must treat its basis as if depreciation had been allowed. The straight‑line method is used for that depreciation unless the vessel was under a charter signed before this part of the law was enacted. Interest expense is partly disallowed: deny the share equal to the fair market value of qualifying vessels divided by total assets for the electing company, or divided by the electing group’s total assets for a group member.