Publication 595 (Rev. February 2006) - Capital Construction Fund For Commercial Fishermen Page 4

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•
Partnerships and S corporations. The deduc-
NMFS will not approve amounts withdrawn to
TIP
tion for partnership earnings from operations de-
purchase nets not continuously attached to the ves-
posited into a CCF account is separately stated
sel, such as seine nets, gill set-nets, and gill
on Schedule K (Form 1065), line 13d, and allocated to the
drift-nets.
partners on Schedule K-1 (Form 1065), box 13 (for 2005).
•
NMFS will approve amounts withdrawn to purchase
The deduction for S corporation earnings deposited into a
trawl nets.
CCF account is separately stated on Schedule K (Form
1120S), line 12d, and allocated to the shareholders on
Qualified vessel. This is any vessel that meets all of the
Schedule K-1 (Form 1120S), box 12 (for 2005).
following requirements.
•
Tax Treatment of CCF Earnings
The vessel was built or rebuilt in the United States.
•
The vessel is documented under the laws of the
This section explains the tax treatment of the earnings
United States.
from the assets in your CCF account when the earnings
•
are redeposited or left in your account. However, if you
The person maintaining the CCF account agrees
choose to withdraw the earnings in the year earned, you
with the Secretary of Commerce that the vessel will
must generally pay income tax on them.
be operated in United States foreign trade, Great
Lakes trade, noncontiguous domestic trade, or the
Capital gains. Do not report any capital gains from the
fisheries of the United States.
sale of capital assets held in your CCF account. This
includes capital gain distributions reported to you on Form
How to determine the source of qualified withdrawals.
1099-DIV or a substitute statement. However, you should
When you make a qualified withdrawal, the amount is
attach a statement to your tax return to list the payers and
treated as being withdrawn in the following order from the
the amounts and to identify the capital gains as “CCF
accounts listed below.
account earnings.”
1. The capital account.
Interest and dividends. Do not report any ordinary in-
come (such as interest and dividends) you earn on the
2. The capital gain account.
assets in your CCF account. However, you should attach a
3. The ordinary income account.
statement to your return to list the payers and the amounts
and to identify them as “CCF account earnings.”
Excluding qualified withdrawals from tax. Do not re-
If you are required to file Schedule B (Form 1040), you
port on your income tax return any qualified withdrawals
can add these earnings to the list of payers and amounts
from your CCF account.
on line 1 or line 5 and identify them as “CCF earnings.”
Then, subtract the same amounts from the list and identify
Reduce the depreciable basis of fishing vessels
them as “CCF deposits.”
!
you acquire, build, or rebuild when you make a
qualified withdrawal from either the capital gain
CAUTION
Tax-exempt interest. Do not report tax-exempt interest
or the ordinary income account.
from state or local bonds you held in your CCF account.
You are not required to report this interest on Form 1040,
line 8b.
Nonqualified Withdrawals
Tax Treatment of CCF Withdrawals
A nonqualified withdrawal from a CCF account is generally
any withdrawal that is not a qualified withdrawal. Qualified
This section discusses the tax treatment of amounts you
withdrawals are defined under Qualified Withdrawals, ear-
withdraw from your CCF account during the year.
lier.
Examples. Examples of nonqualified withdrawals include
the following amounts from either the ordinary income
Qualified Withdrawals
account or the capital gain account.
A qualified withdrawal from a CCF account is one that is
•
Amounts remaining in a CCF account upon termina-
approved by NMFS for either of the following uses.
tion of your agreement with NMFS.
•
Acquiring, building, or rebuilding qualified vessels
•
Amounts you withdraw and use to make principal
(defined next).
payments on the mortgage of a vessel if the basis of
•
Making principal payments on the mortgage of a
that vessel and the bases of other vessels you own
qualified vessel.
have already been reduced to zero.
Page 4

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