46 U.S.C. § 53511 Tax Treatment of Nonqualified Withdrawals

• Library: United States Statutes
• Edition: 2023
• Currency: Current through P.L. 118-34 (published on www.congress.gov on 12/26/2023), except for [P. L. 118-31]
• Year: 2023
• Citation: 46 U.S.C. § 53511

(a) IN GENERAL.-Except as provided in section 53513 of this title, a withdrawal from a fund that is not a qualified withdrawal shall be treated as a nonqualified withdrawal.

(b) ORDER OF WITHDRAWALS.-A nonqualified withdrawal shall be treated as made-

(1) first from the ordinary income account;

(2) second from the capital gain account; and

(3) third from the capital account.

(c) TAX TREATMENT.-For purposes of the Internal Revenue Code of 1986 ( 26 U.S.C. 1 et seq.)-

(1) a nonqualified withdrawal from the ordinary income account shall be included in income as an item of ordinary income for the taxable year in which the withdrawal is made;

(2) a nonqualified withdrawal from the capital gain account shall be included in income for the taxable year in which the withdrawal is made as an item of gain realized during that year from the disposition of an asset held for more than 6 months; and

(3) for the period through the last date prescribed for payment of tax for the taxable year in which the withdrawal is made-

(A) no interest shall be payable under section 6601 of such Code ( 26 U.S.C. 6601 ) and no addition to the tax shall be payable under section 6651 of such Code ( 26 U.S.C. 6651 );

(B) interest on the amount of the additional tax attributable to an amount treated as a nonqualified withdrawal from the ordinary income account or the capital gain account shall be paid at the rate determined under subsection (d) from the last date prescribed for payment of the tax for the taxable year for which the amount was deposited in the fund; and

(C) no interest shall be payable on amounts treated as withdrawn on a last-in-first-out basis under section 53512 of this title.

(d) INTEREST RATE.-The rate of interest under subsection (c)(3)(B) for a nonqualified withdrawal made in a taxable year beginning after 1971 shall be determined and published jointly by the Secretary and the Secretary of the Treasury. The rate shall be such that its relationship to 8 percent is comparable, as determined by the Secretaries under joint regulations, to the relationship between-

(1) the money rates and investment yields for the calendar year immediately before the beginning of the taxable year; and

(2) the money rates and investment yields for the calendar year 1970.

(e) NONQUALIFIED WITHDRAWALS.-

(1) IN GENERAL.-The following applicable percentage of any amount that remains in a capital construction fund at the close of the following specified taxable year following the taxable year for which the amount was deposited shall be treated as a nonqualified withdrawal: