Conrail Public Sale Act of 1985

Conrail Public Sale Act of 1985 - Title I: Amendments to the Regional Rail Reorganization Act of 1973 and the Northeast Rail Service Act of 1981 - Amends the Regional Rail Reorganization Act of 1973 to terminate the authority of the United States Railway Association (the Association) to purchase certain Conrail stock.

Releases any Conrail director from liability for implementing in good faith the sale of the Federal interest in Conrail common stock.

Directs the Secretary of Transportation to execute and deliver Purchase Agreements on behalf of the United States no later than ten days following the date of enactment of this Act. Prescribes guidelines for: (1) the sale of Conrail; (2) the cancellation of Conrail debt and preferred stock; (3) public interest covenants; and (4) accounting determinations.

Makes Conrail responsible for funding all labor protection benefits after the closing date, and absolves the United States from any liability for such benefits after that date.

Title II: Technical and Conforming Amendments and Repeals - Defines "Purchasers" to mean the investor group organized by Morgan Stanley and Company, Inc., to purchase the Federal interest in Conrail common stock as identified in the Shareholders' Agreement. Defines "Shareholders' Agreement" as the agreement among the Purchasers, Conrail, and Morgan Stanley and Company, Inc. in the form filed with the Committee on Commerce, Science and Transportation of the Senate.

Title III: Revenue Provisions - Provides guidelines for the tax treatment of Conrail after the closing date. Specifies the earnings and profits which Conrail shall be deemed to have accumulated as of the closing date. Closes the Conrail taxable year upon the closing date.

Title IV: Miscellaneous Provisions - Retains the common carrier status of Conrail after the sale. Provides that purchase of Conrail stock shall not be the sole basis of a determination that a purchaser has become a common carrier by railroad under Federal law.