Irs Publication 595 - Tax Highlights For Commercial Fishermen

b) Insurance or indemnity proceeds at-

Self-employment tax. You must use your

Qualified vessel. This is any vessel that

meets all of the following requirements.

tributable to agreement vessels held

net profit or loss from your fishing business to

figure your self-employment tax. Do not reduce

for 6 months or less.

•

The vessel was built or rebuilt in the

your net profit or loss by any earnings from

United States.

c) Any capital gain from assets held in

operations you deposit into your CCF account.

your CCF account for 6 months or

•

The vessel is documented under the laws

Partnerships and S corporations.

less.

of the United States.

TIP

The deduction for partnership earnings

•

The person maintaining the CCF account

from operations deposited into a CCF

3) Any ordinary income (such as depreciation

agrees with the Secretary of Commerce

account is separately stated on Schedule K

recapture) from either of the following

that the vessel will be operated in United

(Form 1065), line 11, and allocated to the part-

sources.

States foreign trade, Great Lakes trade,

ners on Schedule K – 1 (Form 1065), line 11.

a) The sale or other disposition of agree-

noncontiguous domestic trade, or the fish-

The deduction for S corporation earnings

eries of the United States.

ment vessels.

deposited into a CCF account is separately

stated on Schedule K (Form 1120S), line 10,

b) Insurance or indemnity proceeds at-

and allocated to the shareholders on Schedule

How to determine the source of qualified

tributable to agreement vessels.

K – 1 (Form 1120S), line 10.

withdrawals. When you make a qualified

withdrawal, the amount is treated as being with-

4) Any interest (not including tax-exempt in-

drawn in the following order from the accounts

terest from state and local bonds), most

Tax Treatment of CCF

listed below.

dividends, and other ordinary income

Earnings

earned on the assets in your CCF account.

1) The capital account.

This section explains the tax treatment of the

2) The capital gain account.

Tax Treatment of CCF

earnings from the assets in your CCF account

when the earnings are redeposited or left in your

3) The ordinary income account.

Deposits

account. However, if you choose to withdraw the

earnings in the year earned, you must generally

Excluding qualified withdrawals from tax.

This section explains the tax treatment of in-

pay income tax on them.

Do not report on your income tax return any

come used as the basis for CCF deposits.

qualified withdrawals from your CCF account.

Capital gains. Do not report any capital gains

Capital gains. Do not report any transaction

Reduce the depreciable basis of fish-

from the sale of capital assets held in your CCF

that produces a capital gain if you deposit the

ing vessels you acquire, build, or re-

account. This includes capital gain distributions

build when you make a qualified

net proceeds into your CCF account. This treat-

CAUTION

reported to you on Form 1099 – DIV or a substi-

withdrawal from either the capital gain or the

ment applies to either of the following transac-

tute statement. However, you should attach a

ordinary income account.

tions.

statement to your tax return to list the payers

•

and the amounts and to identify the capital gains

The sale or other disposition of an agree-

as “CCF account earnings.”

ment vessel.

Nonqualified Withdrawals

•

The receipt of insurance or indemnity pro-

Interest and dividends. Do not report any

A nonqualified withdrawal from a CCF account

ceeds attributable to an agreement vessel.

ordinary income (such as interest and divi-

is generally any withdrawal that is not a qualified

dends) you earn on the assets in your CCF

withdrawal. Qualified withdrawals are defined

account. However, you should attach a state-

Depreciation recapture. Do not report any

under Qualified Withdrawals, earlier.

ment to your return to list the payers and the

transaction that produces depreciation recap-

amounts and to identify them as “CCF account

ture if you deposit the net proceeds into your

Examples. Examples of nonqualified with-

earnings.”

CCF account. This treatment applies to either of

drawals include the following amounts from ei-

the following transactions.

If you are required to file Schedule B (Form

ther the ordinary income account or the capital

1040), you can add these earnings to the list of

gain account.

•

The sale or other disposition of an agree-

payers and amounts on line 1 or line 5 and

•

Amounts remaining in a CCF account

ment vessel.

identify them as “CCF earnings.” Then subtract

upon termination of your agreement with

•

the same amounts from the list and identify them

The receipt of insurance or indemnity pro-

NMFS.

as “CCF deposits.”

ceeds attributable to an agreement vessel.

•

Amounts you withdraw and use to make

Tax-exempt interest. Do not report tax-ex-

principal payments on the mortgage of a

empt interest from state or local bonds you held

Earnings from operations. Report earnings

vessel if the basis of that vessel and the

in your CCF account. You are not required to

from the operation of agreement vessels on your

bases of other vessels you own have al-

report this interest on line 8b of Form 1040.

Schedule C or C – EZ (Form 1040) even if you

ready been reduced to zero.

deposit part of these earnings into your CCF

•

Amounts determined by IRS to cause your

Tax Treatment of CCF

account. You subtract any part of the earnings

CCF account balance to exceed the

Withdrawals

you deposited into your CCF account from the

amount appropriate to meet your planned

amount you would otherwise enter as taxable

use of withdrawals. (You will generally be

This section discusses the tax treatment of

income on line 39 (Form 1040). In the margin to

given 3 years to revise your plans to cover

amounts you withdraw from your CCF account

the left of line 39, write “CCF” and the amount of

this excess balance.)

during the year.

the deposits. Do not deduct these CCF deposits

•

Amounts you leave in your account for

on Schedule C or C – EZ (Form 1040).

more than 25 years. (There is a graduated

If you deposit earnings from operations

Qualified Withdrawals

schedule under which the percentage ap-

into your CCF account and you must

plied to determine the amount of the non-

complete other forms such as Form

CAUTION

A qualified withdrawal from a CCF account is

qualified withdrawal increases from 20% in

6251, Alternative Minimum Tax (Individuals), or

one that is approved by NMFS for either of the

the 26th year to 100% in the 30th year.)

a worksheet for Schedule D (Form 1040), you

following uses.

•

Amounts for the purchase of seine nets,

will need to make an extra computation. When

•

Acquiring, building, or rebuilding qualified

gill set-nets, and gill drift-nets.

the other form instructs you to use the amount

vessels (defined next).

from line 37, Form 1040, do not use that amount.

•

Instead, add lines 38 and 39, Form 1040, and

Making principal payments on the mort-

How to determine the source of nonqualified

use that amount.

gage of a qualified vessel.

withdrawals.

When you make a nonqualified

Page 8

Irs Publication 595 - Tax Highlights For Commercial Fishermen - 2001 Page 8

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