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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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