§53306 Recognition of Gain for Tax Purposes

Summary

You do not have to report a taxable gain on selling or losing a vessel for federal income tax if you do two things. Within 60 days after you get the sale money or the payment for the loss, you must put an amount equal to the "net proceeds" or "net indemnity" into a construction reserve fund. "Net proceeds" and "net indemnity" mean the vessel’s adjusted basis plus the gain you would have reported without this rule. You also must choose (elect) not to recognize the gain under this rule. Normally you make that election on your tax return for the year the gain happened. If the United States bought, requisitioned, or you got payment after that tax year ended, you must make the election within 60 days after receiving the payment, using the form the Treasury Department requires. If that late election needs a tax recalculation but a time limit would block it, you can still get the recalculation if you file a claim within 6 months after making the election.