Depreciation allocation for tonnage tax assets governs apportionment of written down value and pro rata depreciation on reclassified ships.

Statute prescribes apportionment of a ship block's written down value on entry to the tonnage tax scheme between qualifying and other assets by reference to book written down values; the qualifying assets form a separate block for depreciation. Reclassifications between tonnage tax use and other use move apportioned written down value between blocks by formula, with depreciation for the year allocated pro rata by days of use. Capital gains on transfers of qualifying assets are computed under ordinary capital gains provisions using the apportioned written down value of the qualifying block.

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