Tutor-Saliba Corporation, A California Corporation - Page 10




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               payable to the taxpayer after a specified period of                    
               successful performance, the incentive fee is includible                
               in the total contract price at the time and to the                     
               extent that it can reasonably be predicted that the                    
               performance objectives will be met, for purposes of                    
               both the percentage of completion method and the look-                 
               back method.  Similarly, a portion of the contract                     
               price that is in dispute is included in the total                      
               contract price at the time and to the extent that the                  
               taxpayer can reasonably expect the dispute will be                     
               resolved in the taxpayer’s favor (without regard to                    
               when the taxpayer receives payment for the amount in                   
               dispute or when the dispute is finally resolved).                      
          Sec. 1.460-6(c)(2)(vi)(A) and (B), Income Tax Regs.  Thus, under            
          the regulation, the total contract price used in the percentage             
          of completion calculation includes any amounts attributable to              
          contingent rights or obligations.                                           
               Petitioner argues that (i) the regulation does not implement           
          the congressional mandate as required under applicable law; (ii)            
          the regulation attempts to “repeal”, without clear and explicit             
          congressional support, the all events test, which has been                  
          recognized as a fundamental tax principle; (iii) respondent                 
          attempts to usurp Congress and supersede the look-back method by            
          issuance of the regulation to address timing differences; and               
          (iv) the regulation is not reasonable in view of prior law and              
          usage and is not reasonable in application.3  Respondent argues             
          that it is reasonable to require a taxpayer to estimate the total           
          contract price of a long-term contract and, thus, to include a              



               3 Petitioner is not arguing that income arising out of                 
          contingencies and disputes be excluded from the look-back method.           





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Last modified: May 25, 2011