- 33 -
taxable year the items of income and expenses that must be
reported within that year. It is relevant only to the timing of
deductions and income recognition. RECO Indus., Inc. v.
Commissioner, supra at 922. Like other accounting methods, the
completed contract method relies on other sections of the Code,
such as the DISC provisions, to determine the amount of income to
be recognized and the amount of allowable deductions. The
purpose of the pricing rules in the DISC provisions is to
determine the amount of income that taxpayers engaged in export
activities must recognize and the amount of income that is tax
deferred. The completed contract method has a different purpose.
It determines the taxable year in which a related supplier
recognizes the income attributable to export sales, the amount of
income to be recognized having been determined by the DISC
provisions. Thus, the variations or exceptions to the completed
contract method here do not govern which costs are allocable to
long-term export contracts for purposes of determining CTI.
In addition, requiring taxpayers to account for prior year
period costs in calculating CTI does not interfere with the
current deduction allowed for period costs under the completed
contract method. Petitioners' interpretation of the completed
contract method gives taxpayers benefits in addition to their
ability to currently deduct period costs. There is no indication
that Congress intended the limitation on deferral or exclusion to
promote foreign exports to include a double or extra benefit only
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011