100 STAT. 2216
PUBLIC LAW 99-514—OCT. 22, 1986 "(E) AMOUNTS IN FUND ON JANUARY i, 1987.—For purposes of this paragraph, all amounts in a capital construction fund on January 1, 1987, shall be treated as deposited in such fund on such date. "(6) NONQUALIFIED WITHDRAWALS TAXED AT HIGHEST MARGINAL RATE.—
"(A) IN GENERAL.—In the case of any taxable year for which there is a nonqualified withdrawal (including any amount so treated under paragraph (5)), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 shall be determined— "(i) by excluding such withdrawal from gross income, .;. and "(ii) by increasing the tax imposed by chapter 1 of < - |, v such Code by the product of the amount of such withdrawal and the highest rate of tax specified in section 1 (section 11 in the case of a corporation) of such Code. With respect to the portion of any nonqualified withdrawal made out of the capital gain account during a taxable year to which section l(i) or 1201(a) of such Code applies, the rate ,,l of tax taken into account under the preceding sentence shall not exceed 28 percent (34 percent in the case of a corporation). "(B) TAX BENEFIT RULE.—If any portion of a nonqualified withdrawal is properly attributable to deposits (other than earnings on deposits) made by the taxpayer in any taxable year which did not reduce the taxpayer's liability for tax under chapter 1 for any taxable year preceding the taxable year in which such withdrawal occurs— "(i) such portion shall not be taken into account under subparagraph (A), and ' "(ii) an amount equal to such portion shall be treated as allowed as a deduction under section 172 of such Code for the taxable year in which such withdrawal occurs. "(C) COORDINATION WITH DEDUCTION FOR NET OPERATING
LOSSES.—Any nonqualified withdrawal excluded from gross income under subparagraph (A) shall be excluded in determining taxable income under section 172(b)(2) of the Internal Revenue Code of 1986." (f) CLERICAL AMENDMENT.—The table of sections for chapter 77 is amended by adding at the end thereof the following new item: "Sec. 7518. Tax incentives relating to merchant marine capital construction funds." EFFECTIVE DATE.—The amendments made by this section shall
(g) apply to taxable years beginning after December 31, 1986.
TITLE III—CAPITAL GAINS Subtitle A—Individual Capital Gains SEC. 301. REPEAL OF EXCLUSION FOR LONG-TERM CAPITAL GAINS OF INDIVIDUALS.
(a) IN GENERAL.—Section 1202 (relating to deduction for capital gains) is hereby repealed.
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