Recognition of gain for tax purposes

increased by the difference between the cost of the new vessel and the trade-in allowance of the obsolete vessel; and decreased by the amount of loss recognized on the transfer. 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— (Source: (Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1663.))