46 U.S.C. § 57307 — Recognition of gain for tax purposes

Normally, trading in an asset for a new one can create a taxable gain. This section removes that rule in one specific case. If the owner of an obsolete vessel gives it to the Secretary of Transportation in exchange for a trade-in allowance under this chapter, the owner does not have to report a taxable gain on the trade. The new vessel then takes on the same tax basis the old vessel had. Two adjustments apply to that basis: (1) It increases by the difference between what the new vessel actually cost and the trade-in allowance credited for the old vessel. (2) It decreases by the amount of any loss the owner already claimed on the transfer.