Tonnage tax asset depreciation requires proportional written-down-value allocation, use-based block transfers, and capital-gains computation for qualifying assets.

Section 229 apportions the written down value of an existing block of ships or inland vessels between qualifying assets and other assets according to their respective book written down values. The qualifying-assets portion forms a separate block for tonnage tax depreciation. When an asset changes between tonnage tax and other business use, an appropriate proportion of written down value is transferred between the blocks, and depreciation for that year is allocated by days of use. Gains from transfer of qualifying assets are computed by applying the capital-gains provisions with reference to the qualifying-assets block.

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