PUBLIC LAWS-CH. 417-AUG. 4, 1939 gross tons, (B) is not less than seventeen years old and, in the judg- ment of the Commission, is obsolete or inadequate for successful oper- ation in the domestic or foreign trade of the United States, and (C) is owned by a citizen or citizens of the United States and has been owned by such citizen or citizens for at least three years immediately prior to the date of acquisition hereunder. "New vessel." "(2) The term 'new vessel' means a vessel or vessels, each of which (A) is constructed under the provisions of this Act, and is acquired within two years from the date of completion of such vessel, or is 6 SatS.6 , upp purchased under section 714, as amended, by the person turning in an iv, i 1204. obsolete vessel under this section, or (B) is hereafter constructed in a domestic shipyard on private account and not under the provisions of this Act, and documented under the laws of the United States. let vessels inoex- "(b) In order to promote the construction of new, safe, and effi- hane for allowance cient vessels to carry the domestic and foreign water-borne commerce of credit. of the United States, the Commission is authorized, subject to the provisions of this section, to acquire any obsolete vessel in exchange for an allowance of credit. The amount of such allowance shall be determined at the time the owner contracts for the construction or Appliceaton of purchase of a new vessel. The allowance shall not be paid to the chase price of new owner of the obsolete vessel but shall be applied upon the purchase vessel. price of a new vessel. In the case of a new vessel constructed under the provisions of this Act, such allowance may, under such terms and conditions as the Commission may prescribe, be applied upon the cash payments required under this Act. In case the new vessel is not constructed under the provisions of this Act, the allowance shall, upon transfer of the obsolete vessel to the Commission, be paid, for the account of the owner, to the shipbuilder constructing such new vessel. Utiity value of new (c) The utility value of the new vessel for operation in the domes- tic or foreign commerce of the United States shall not be substan- tially less than that of the obsolete vessel. The gross tonnage of the obsolete vessel may exceed the gross tonnage of the new vessel in a ratio not in excess of three to one, if the Commission finds that the new vessel, although of lesser tonnage, will provide utility value equivalent to or greater than that of the obsolete vessel. lDeterination oal- "(d) The allowance for an obsolete vessel shall be the fair and reasonable value of such vessel as determined by the Commission. In making such determination the Commission shall consider: (1) The scrap value of the obsolete vessel both in American and in foreign markets, (2) the depreciated value based on a twenty-year life, and (3) the market value thereof for operation in the world trade or in the foreign or domestic trade of the United States. If the owner of the obsolete vessel uses such vessel during the period of construc- tion of the new vessel, the allowance shall be reduced by an amount representing the fair value of such use. los upon a sale or ex "(e) No gain shall be recognized to the owner for the purpose obange, etc. of Federal income taxes in the case of a transfer of an obsolete vessel to the Commission under the provisions of this section. The basis for gain or loss upon a sale or exchange and for depreciation under the applicable Federal income-tax laws of a new vessel acquired as con- templated in this section shall be the same as the basis of the obso- lete vessel or vessels exchanged for credit upon the acquisition of such new vessel, increased in the amount of the cost of such vessel (other than the cost represented by such obsolete vessel or vessels) and decreased in the amount of loss recognized upon such transfer. Reprt to C "on(f) The Commission shall include in its annual report to Congress a detailed statement of all transactions consummated under the pro- visions of the preceding subsections during the period covered by such report. 1184 [53 STAT.
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