Tutor-Saliba Corporation, A California Corporation - Page 6




                                        - 6 -                                         
               Section 460 was enacted by the Tax Reform Act of 1986, Pub.            
          L. 99-514, sec. 804(a), 100 Stat. 2385.  Prior to 1986, income              
          from long-term contracts could be accounted for under one of two            
          alternative methods:  the percentage of completion method or the            
          completed contract method.  Under the percentage of completion              
          method, income was recognized according to the percentage of the            
          contract completed during each taxable year.  The determination             
          of the portion of the contract completed during the taxable year            
          could be made either by (1) comparing the costs incurred during             
          the year to the total estimated costs to be incurred under the              
          contract, or (2) comparing the work performed during the year               
          with the estimated total work to be performed.  See sec. 1.451-             
          3(c)(2)(i) and (ii), Income Tax Regs.                                       



               2(...continued)                                                        
               underpayment of tax for each taxable year referred                     
               to in subparagraph (A) which would result solely                       
               from the application of subparagraph (A), and                          
                    (C) then using the overpayment rate                               
               established by section 6621, compounded daily, on                      
               the overpayment or underpayment determined under                       
               subparagraph (B).                                                      
               For purposes of the preceding sentence, any amount                     
               properly taken into account after completion of                        
               the contract shall be taken into account by                            
               discounting (using the Federal mid-term rate                           
               determined under section 1274(d) as of the time is                     
               so properly taken into account) such amount to its                     
               value as of the completion of the contract.  The                       
               taxpayer may elect with respect to any contract to                     
               have the preceding sentence not apply to such                          
               contract.                                                              





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