§ 57307. Recognition of gain for tax purposes

The owner of an obsolete vessel does not recognize a gain under the Federal income tax laws when the vessel is transferred to the Secretary of Transportation in exchange for a trade-in allowance under this chapter. The basis of the new vessel acquired with the allowance is the same as the basis of the obsolete vessel—

• (1) increased by the difference between the cost of the new vessel and the trade-in allowance of the obsolete vessel; and
• (2) decreased by the amount of loss recognized on the transfer.