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Regs., cannot always be read into section 1.451-3(d)(6)(ii),
Income Tax Regs., as respondent suggests.
For these reasons, the language and parallel structure of
the regulations do not support incorporating the reasonableness
standard of section 1.263A-1(f)(4), Income Tax Regs., into the
undefined phrase “reasonable allocation” in sections 1.263A-
1(e)(3)(i) and 1.451-3(d)(6)(ii), Income Tax Regs.
C. Legislative History of Section 263A
Respondent maintains that the legislative history of section
263A indicates that the reasonableness standard of section
1.263A-1(f)(4), Income Tax Regs., should be incorporated into
sections 1.263A-1(e)(3)(i) and 1.451-3(d)(6)(ii), Income Tax
Regs. Respondent asserts that “This incorporation is necessary
to satisfy Congressional intent to provide a single comprehensive
set of harmonious rules to govern the capitalization of costs of
producing property”.
The uniform capitalization rules of section 263A and the
special rules for long-term contracts under section 460 were
enacted as part of the Tax Reform Act of 1986, Pub. L. 99-514,
100 Stat. 2085. With regard to the uniform capitalization rules,
the Senate report states:
The Committee believes that, in order to more
accurately reflect income and make the income tax
system more neutral, a single, comprehensive set of
rules should govern the capitalization of costs of
producing, acquiring, and holding property * * *
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