Anschutz Company and Subsidiaries - Page 42

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               subject to appropriate exceptions where application of                 
               the rules might be unduly burdensome.                                  
                         *    *    *    *    *    *    *                              
                    The uniform capitalization rules will be patterned                
               after the rules applicable to extended period long-term                
               contracts, set forth in the final regulations issued                   
               under section 451.  Accordingly, taxpayers subject to                  
               the rules will be required to capitalize not only                      
               direct costs but also an allocable portion of most                     
               indirect costs that benefit the assets produced or                     
               acquired for resale * * *.  The committee recognizes                   
               that modifications of the rules set forth in the long-                 
               term contract regulations may be necessary or                          
               appropriate in order to adapt such rules to production                 
               not involving a contract, and intends that the Treasury                
               Department will have the authority to make such                        
               modifications.                                                         
                    * * * The existing long-term contract regulations                 
               provide a large measure of flexibility to taxpayers in                 
               allocating indirect costs to contracts inasmuch as they                
               permit any reasonable method of allocation authorized                  
               by cost accounting principles.  The committee expects                  
               that the regulations under this provision will adopt a                 
               similarly liberal approach and permit allocations of                   
               costs among numerous items produced or held for resale                 
               by a taxpayer to be made on the basis of burden rates                  
               of other appropriate methods similar to those provided                 
               under present law.                                                     
          S. Rept. 99-313, at 140-142 (1986), 1986-3 C.B. (Vol. 3) 1, 140-            
          142.  In less detail, the House report states:  “allocations of             
          indirect production costs among items produced, or between                  
          inventory and current expense, are to be made under rules similar           
          to those provided under present law.”  H. Rept. 99-426, at 626              
          (1985), 1986-3 C.B. (Vol. 2) 1, 626.                                        
               The legislative history, as quoted above, clearly indicates            
          that Congress intended the uniform capitalization rules to be               






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