- 4 -
the government agency that is a party thereto (contracting party)
for damages. Each of the contracts provided for liquidated
damages in the event petitioner failed to complete the job or did
not otherwise fulfill its contractual obligations. The contracts
also provided for a retention of a specified percentage of the
contract price until the contracting party completed review of
the job and accepted it as completed. Petitioner submitted
certain change orders on the contracts in question that were
denied by the other contracting party. Petitioner followed the
required procedures for submitting claims and for appealing
adverse determinations on disputed claims.
For Federal income tax purposes, petitioner was subject to
section 460 for the reporting of income from long-term contracts.
While petitioner reported income from its long-term contracts
under the percentage of completion method, it employed the all-
events test to govern income recognition from disputed claims.
Thus, petitioner did not include income from disputed claims when
estimating the total contract price under the percentage of
completion method, but petitioner instead reported as income only
the portion of disputed claims actually awarded to petitioner in
the taxable year in which either a settlement was entered into,
an arbitration award was determined, or a court rendered
judgment.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011