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pension and profit-sharing contributions, and costs attributable
to strikes, rework labor, scrap, and spoilage. Sec. 1.451-
3(d)(5)(iii), Income Tax Regs.
Petitioners' use of the completed contract method of
accounting to report income and deductions for their long-term
contracts has not been questioned. This method of accounting
provides an alternative to the annual accrual method of
accounting for long-term contracts for which the ultimate profit
or loss is not ascertainable until the contract is completed.
See RECO Indus., Inc. v. Commissioner, 83 T.C. 912, 921 (1984).
The method allows a taxpayer to account for the entire result of
a long-term contract at one time. Id. The purpose of the
completed contract method is to match the costs of generating
income with the income produced. In this case, however,
petitioners try to use the completed contract method to avoid the
matching of costs with income from export sales for purposes of
computing CTI as required by the regulations under sections 994
and 925. As a result, petitioners did not subtract all the costs
related to their export sales as defined in section 1.994-
1(c)(6)(iii), Income Tax Regs., from the export income that the
expenditures generated.
The completed contract method of accounting does not
necessarily conflict with requiring taxpayers to account for all
related period costs in determining CTI. The completed contract
method is an accounting method that allocates to a particular
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