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Account

Nos.

581

585

587

590

598

599

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Appropriated.

Unappropriated.

Total surplus.

Total net worth.

Total liabilities and capital.

NOTE: Contingent liabilities (not included above).

[G.O. 22, Rev., 15 F.R. 7935, Nov. 21, 1950, as amended by Amdt. 3, 23 F.R. 6283, Aug. 15, 1958; Amdt. 6, 32 F.R. 20777, Dec 23, 1967]

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675

685

690

691

960

970

975

979

695

985

985 986

989

990

994 998

Water-line operating expense.

Gross profit (or loss) from shipping operations.

Other income:

Interest income.

Dividend income.

Miscellaneous other income.

Release of premium on long-term debt.

Total other income.

Other deductions from income:

Interest expense.

Amortization of deferred charges.

Doubtful notes and accounts receivable.

Miscellaneous deductions from income.

Total other deductions from income.

Net profit (or loss) from shipping operations.
Non-shipping operations:

Income from non-shipping operations.

Expense of nonshipping operations.

Gross profit (or loss) from nonshipping operations.
Overhead expense.

Depreciation; nonshipping property and equipment.
Total expenses.

Net profit (or loss) from nonshipping operations.
Ordinary income (or loss) before Federal income taxes.
Federal income taxes on ordinary income.

Ordinary income (or loss).

EXTRAORDINARY AND PRIOR PERIOD ITEMS

Extraordinary items (net).

Prior period items (net).

Federal income taxes on extraordinary and prior period items.

Total extraordinary and prior period items.

Net income (or loss).

[G.O. 22, Rev., 15 F.R. 7935, Nov. 21, 1950, as amended by Amdt. 6, 32 F.R. 20777, Dec. 23, 1967]

§ 282.0-40 Water-line operating revenue and expense statement.

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PART 284-VALUATION OF VESSELS
FOR DETERMINING CAPITAL EM-
PLOYED AND NET EARNINGS
UNDER OPERATING-DIFFERENTIAL
SUBSIDY AGREEMENTS

Sec.
284.1 Vessels included.
284.2 Basis of valuation.

AUTHORITY: The provisions of this Part 284 issued under sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114; Pub. Law 86-518, 74 Stat. 216. Interpret or apply secs. 9 and 12(d), 60 Stat. 46, 50; 50 U.S.C. App. 1742, 1745.

SOURCE: The provisions of this Part 284 contained in General Order 24, 3d Revision, 25 F.R. 7536, Aug. 10, 1960; 25 F.R. 7740, Aug. 13, 1960.

§ 284.1 Vessels included.

The vessels to be valued pursuant to the provisions of this part are (a) all vessels subsidized under operating-differential subsidy agreements, (b) all vessels owned by the operator not so subsidized when, by reason of employment of such vessels in the subsidized services, the Maritime Administration has required

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(a) General. Except as hereinafter otherwise set forth, vessels shall be valued at the actual cost of acquisition (not the cost of replacement or reproduction), subject to the adjustments provided for hereinafter.

(b) Acquisition from other than a predecessor or "related company"—(1) For cash or equivalent. The cost of acquisition of vessels acquired from other than a predecessor, or a subsidiary company, holding company, affiliate company, or associate company, of the operator (herein referred to as a "related company"), for cash or a consideration determined by the Maritime Administration to be the equivalent of cash, shall be the purchase price plus any

other expenditures which the Maritime Administration determines to be properly capitalizable as part of the cost of acquisition. There shall not be included therein commissions paid officers or directors of, or stockholders having a substantial stock interest in, the operator or a related company, or adjustments attributed to restricted trade or other provisions (if any) in contracts under which such vessels were acquired. The cost of vessels acquired by the operator from the builders, directly or through the Maritime Administration or predecessor agencies (except a vessel the price of which is adjusted under section 9 of the Merchant Ship Sales Act of 1946), shall include interest accrued during the period of construction on borrowed capital (less interest earned thereon) used to make payments on account of construction (including interest charged by the Maritime Administration on payments made to the builder) and such other expenditures which the Maritime Administration determines to be properly capitalizable.

(2) For consideration other than cash or equivalent. The cost of acquisition of any vessel acquired by the operator from other than its predecessor or a related company for any consideration, the cash value of which, in the opinion of the Maritime Administration, cannot be determined definitely, shall be the fair value of such vessel at the date of acquisition, as determined by the Maritime Administration. The cost of acquisition of any vessel acquired by the operator from the Maritime Administration or predecessor agencies (except a vessel the price of which is adjusted under section 9 of the Merchant Ship Sales Act of 1946) shall be the agreed purchase price for such vessel plus any other expenditures which the Maritime Administration determines to be properly capitalizable as part of the cost of acquisition, notwithstanding the fact that part of the consideration paid to the Maritime Administration or predecessor agencies may consist of mortgage notes of the operator. In general, the Maritime Administration will not undertake to place a value upon securities for the purpose of evaluating a vessel acquired in exchange therefor. No valuation by the Maritime Administration of a vessel acquired in whole or in part for securities shall be deemed to be a determination by the Maritime Administration of the value of such securities.

(3) Vessels subject to section 9, Merchant Ship Sales Act of 1946. The cost of acquisition of a vessel, the price of which is adjusted under section 9 of the Merchant Ship Sales Act of 1946, shall be the statutory sales price of the vessel, computed in accordance with section 3(d) of said Act, as of March 8, 1946 if the vessel was acquired by the operator on or before that date or as of the date of the original delivery of the vessel to the operator if contracted for prior to but delivered after March 8, 1946.

(c) Acquisition from a predecessor or related company. The cost of acquisition of any vessel acquired by the operator from its predecessor or from any person who at any time prior to the date of acquisition of such vessel by the operator was a related company, shall be the cost of acquisition (determined as hereinabove set forth) of such vessel from the nearest person in the chain of title who was not at any time prior to the date of his transfer of the vessel either the predecessor to or a related company of the operator or the predecessor to or a related company of the person to whom he transferred title to said vessel, adjusted for the period from the date of such prior acquisition to the date of acquisition by the operator, in the manner hereinafter set forth. (d) Basing upon "fair value" when deemed necessary. Nothing herein contained shall preclude the Maritime Administration from basing the valuation of any vessel upon the fair value (as determined by the Maritime Administration) of such vessel at the date of acquisition by the operator in any case in which the Maritime Administration shall deem such method to be necessary for the proper determination of valuation.

valuation

(e) Adjustments for betterments, reconstruction, or reconditioning. For the purpose of (1) determining the value of the vessel as of any date subsequent to the date of acquisition by the operator, or (2) determining the adjustments to be made for the period between the date of acquisition by the predecessor or a related company of the operator and the date of acquisition by the operator (when in accordance with the provisions of this part such cost of prior acquisition is properly applicable), allowance shall be made for the net cost of all

capitalizable betterments, reconstruction, or reconditioning made by the operator, or made during the period of such prior ownership, as the case may be, after making such allowance as the Maritime Administration may deem proper for substantial removals and replacements. No adjustments shall be made, however, with respect to expenditures which are not capitalized, such as those which are treated as deferred charges to operations.

(f) Adjustments for depreciation. (1) On and after January 1, 1960 (with respect to vessels delivered by the shipbuilder on or after January 1, 1946) adjustments shall be made for depreciation on the basis of a twenty-five year economic life of the vessel (twenty years for vessels delivered by the shipbuilder prior to January 1, 1946) computed from the date of final delivery upon completion of the vessel by the shipbuilder to the first owner thereof (except that with respect to a wholly or partially reconstructed or reconditioned vessel the life expectancy of which has been determined to be otherwise jointly by the Secretary of the Treasury and the Secretary of Commerce depreciation shall be computed on the life expectancy so determined) and after deducting from the cost of acquisition the residual value of such vessel, which residual value shall be deemed to be 22 percent of the original construction cost (meaning the full domestic shipyard construction cost insofar as vessels constructed under Title V or Title VII of the Merchant Marine Act, 1936, are concerned); Provided, however, That the residual value shall in no event exceed the cost of acquisition to the operator, determined as herein set forth; And provided further, That the residual values of war-built vessels acquired from the Maritime Administration or predecessor agencies by purchase under section 4 or exchange under section 8 of the Merchant Ship Sales Act of 1946 or with respect to which the prior sales price is adjusted pursuant to section 9 of that Act shall be deemed to be 22 percent of the prewar domestic cost thereof, as established under the Merchant Ship Sales Act of 1946 and published in the FEDERAL REGISTER.

(2) Vessel depreciation shall be written off proportionately for the period between the date of acquisition with respect to which the cost of acquisition is determined pursuant to the provisions

of this part to the end of the economic life of the vessel determined pursuant to the provisions of this part, except with respect to a vessel which, when purchased, was of a type which required substantial modification, thereby modifying the original purpose of the vessel, depreciation shall be computed and written off on the basis stated in subparagraph (3) of this paragraph. In the case of a vessel the price of which is adjusted under section 9 of the Merchant Ship Sales Act of 1946, the date of acquisition shall for the purpose of this paragraph be March 8, 1946, if the vessel was acquired by the operator on or before that date or the date of the original delivery of the vessel to the operator if contracted for prior to but delivered after March 8, 1946. The actual net cost of capitalizable betterments, reconstruction, or reconditioning shall be depreciated proportionately during the period between the end of the month during which such betterments, reconstruction, or reconditioning was completed and the end of the economic life of the vessel.

(3) Vessel depreciation on the purchase cost of a vessel shall accrue from date title is taken and shall be written off proportionately over the remaining economic life of the vessel in accordance with this part and allocated in the same manner as is the equity in the vessel for capital necessarily employed purposes, except that with respect to a vessel which when purchased was of a type which required substantial modification thereby modifying the original purpose of the vessel (as, for example, conversion of a cargo vessel to a combination or passenger vessel), the properly capitalizable acquisition and modification costs shall be depreciated from the date the vessel is delivered to the owner in its modified state from the shipyard and shall be written off over the remaining economie life of the vessel in accordance with this part.

(4) As to any changes in the revision of subparagraphs (1) and (2) of this paragraph (f) which have been included pursuant to Public Law 86-518, the said changes can not be recognized in the administration of this part until after the applicable contracts of the subsidized Operator involved have been modified, following the filing of an appropriate application by such Operator.

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§ 285.3

Disposition of questions.

(a) Questions arising with respect to statutory authority pursuant to which a contract and subcontracts thereunder are awarded, the grouping of contracts, subcontracts, or both for the purpose of determining financial outcome thereunder for a particular income taxable year, subcontracts not subject to profit-limiting provisions, allowability of costs and accounting methods, or any other matters relating to a determination of profit or loss, should be referred to the Administration for disposition.

(b) In the event provisions of a contract are in conflict with any provisions of the regulations in this part, the provisions of the contract shall prevail.

§ 285.4 Acceptance of statements and certificates.

Acceptance by the Administration or its agent or representative of any statement or certificate shall not constitute a waiver by the Administration of its right to examine the books, files, and records of the contractor or subcontractor, if it shall deem such examination to be necessary or appropriate to a proper finding with respect to the contractor's or subcontractor's profit.

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