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projected. Thus, Congress provided for a “look-back” to account
for variances between the estimated and the actual figures.
Although there is no specific support in the legislative
history for respondent’s position, use of the terms “expected”
and “anticipated” lends support to respondent’s position and is
helpful to our consideration. The House report described the
intended operation of the percentage of completion method as
follows:
Income from all long-term contracts must be reported
under the percentage of completion method based on the
expected costs rather than physical completion. Thus,
the amount of gross income from a long-term contract
recognized in a particular taxable year generally is
that proportion of the expected contract price that the
amount of costs incurred through the end of the taxable
year bears to the total expected costs, reduced by
amounts of gross contract price that were included in
gross income in previous taxable years. [H. Rept. 99-
426 (1986), 1986-3 C.B. (Vol. 2) 630; emphasis added.]
In describing the operation of the look-back method, the
Staff of the Joint Committee on Taxation added:
In the taxable year in which the contract is
completed, a determination is made whether the taxes
paid with respect to the contract in each year of the
contract were more or less than the amount that would
have been paid if the actual gross contract price and
the actual total contract costs, rather than the
anticipated contract price and costs, had been used to
compute gross income. [Staff of Joint Comm. on
Taxation, General Explanation of the Tax Reform Act of
1986, at 528 (J. Comm. Print 1987); emphasis added.]
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