Internal Revenue Code:Sec. 1357. Items not subject to regular tax; depreciation; interest

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Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter R - Election to Determine Corporate Tax on Certain  
          International Shipping Activities Using Per Ton Rate
        

Statute

  SEC. 1357. ITEMS NOT SUBJECT TO REGULAR TAX; DEPRECIATION; INTEREST.

    (a) Exclusion From Gross Income.--Gross income of an electing 
corporation shall not include its income from qualifying shipping 
activities.
    (b) Electing Group Member.--Gross income of a corporation (other 
than an electing corporation) which is a member of an electing group 
shall not include its income from qualifying shipping activities 
conducted by such member.
    (c) Denial of Losses, Deductions, and Credits.-
            (1) General rule.--Subject to paragraph (2), each item of 
        loss, deduction (other than for interest expense), or credit of 
        any taxpayer with respect to any activity the income from which 
        is excluded from gross income under this section shall be 
        disallowed.
            (2) Depreciation.--
                    (A) In general.--Notwithstanding paragraph (1), 
                the adjusted basis (for purposes of determining gain) of 
                any qualifying vessel shall be determined as if the 
                deduction for depreciation had been allowed.
                    (B) Method.--
                          (i) In general.--Except as provided in 
                      clause (ii), the straight-line method of 
                      depreciation shall apply to qualifying vessels the 
                      income from operation of which is excluded from 
                      gross income under this section.
                          (ii) Exception.--Clause (i) shall not apply 
                      to any qualifying vessel which is subject to a 
                      charter entered into before the date of the 
                      enactment of this subchapter.
            (3) Interest.--
                    (A) In general.--Except as provided in 
                subparagraph (B), the interest expense of an electing 
                corporation shall be disallowed in the ratio that the 
                fair market value of such corporation's qualifying 
                vessels bears to the fair market value of such 
                corporation's total assets.
                    (B) Electing group.--In the case of a corporation 
                which is a member of an electing group, the interest 
                expense of such corporation shall be disallowed in the 
                ratio that the fair market value of such corporation's 
                qualifying vessels bears to the fair market value of the 
                electing groups total assets.

 

Miscellaneous

   Created by Pub.L.108-357,Sec.248(a)., October 22, 2004.  Amendments made 
  by this section shall apply to taxable years beginning after the date of 
  the enactment of this Act.