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explained that, because under section 461(h) economic performance
was required in order for costs to be deducted, a real estate
developer would no longer be allowed to allocate estimated future
construction costs to the developer’s bases in lots sold. See
Notice 91-4, 1991-1 C.B. 315. Thus, it appeared that the
economic performance rules of 461(h) would effectively override
the alternative cost method available to developers under Rev.
Proc. 75-25.
On January 11, 1991, however, respondent issued Notice 91-4,
1991-1 C.B. 315, in which respondent provided that, in spite of
the economic performance rule of section 461(h), the alternative
cost method under Rev. Proc. 75-25 would continue generally to be
available to developers of real estate until additional guidance
from respondent was provided.
On April 9, 1992, the above regulations under section 461(h)
were finalized, but the referenced language in the preamble to
the proposed regulations was eliminated. See regulations under
sec. 461.
Also, on April 9, 1992, respondent issued Rev. Proc. 92-29,
1992-1 C.B. 748, in which a limited version of the alternative
cost method was provided. Under the alternative cost method
provided in Rev. Proc. 92-29, a real estate developer was
permitted to continue to allocate to lots sold the estimated
future construction costs relating to common improvements without
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