- 22 -
effects of using estimates during the life of a contract that may
differ from the actual amounts determined upon completion.
Because the all events test does not recognize income until it is
fixed and determinable, requiring use of the all events test
would render moot any “estimating” of the total contract price,
lead to additional timing differences (income deferrals) and
likely require taxpayers to pay more look-back interest.
Moreover, the statute by its plain language calls for the use of
“estimated” contract price and costs.
Petitioner relies on Professional Equities, Inc. v.
Commissioner, 89 T.C. 165 (1987), contending that we should
declare the “contingent items” regulation invalid to the extent
it purports to regulate the contents of a long-term contract’s
total contract price. We do not view Professional Equities, Inc.
as support for invalidation of the subject regulation. The
temporary regulation considered in Professional Equities, Inc.
was designed to overturn a long line of precedent beginning with
the holding in Stonecrest Corp. v. Commissioner, 24 T.C. 659
(1955). In Stonecrest Corp., we held that the “assumed” and
“subject to” rules in the regulations interpreting former section
453(c) did not apply to wraparound mortgages. The regulation at
issue in Professional Equities, Inc. was at variance with the
Stonecrest Corp. line of cases as well as being at odds with the
language of the statute. In Professional Equities, Inc. v.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011