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

Summary

A qualifying vessel operator that sells a qualifying vessel can elect to put off paying tax on the gain by buying a replacement qualifying vessel. The replacement window runs from one year before the sale until 3 years after the close of the tax year in which the gain is realized, or a later date the IRS approves. Gain is taxed only to the extent the sale proceeds exceed the cost of the replacement vessel. The tax is deferred, not erased: the replacement vessel's cost basis is reduced by the untaxed gain. If the operator makes this election, the IRS has at least 3 years to assess any tax on the gain, counted from when the operator reports the replacement or reports that it will not replace the vessel.

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