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1.460-6(c)(1)(ii)(A), Income Tax Regs. However, the “actual”
contract price is to be contrasted with the “estimated” contract
price, the latter of which is not governed by the all events
test. Thus, we decline to read the parenthetical language as
evidence of congressional intent to apply the all events test to
taxpayers’ disputed claims for purposes of computing the
estimated contract price.
Furthermore, the language relied on by petitioner is
employed in the context of how the look-back method operates.
Taxpayers are required to apply the look-back method to any
amounts that are taken into account after completion of the
contract. Thus, if income is received and properly accounted for
5 or 10 years after completion of the contract, those revenues
are discounted back to the year of completion, and the look-back
method is applied. Such application would likely result in
underpayment interest due by the taxpayer if post-completion
revenues were not included in the estimated total contract price
at the time it was reasonably expected that they would be
received by the taxpayer.
In addition, requiring the inclusion of an estimate of
disputed claims in the total contract price as soon as the
taxpayer reasonably expects to receive them will reduce the
likelihood that a taxpayer will have to pay look-back interest.
The purpose of the look-back method is to offset the time-value
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