David C. Hutchinson, et al. - Page 15

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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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