(ii) the determination of the work done. For the purposes of the EPCM, the criteria on which work done on a contract at the end of the fiscal year is compared to the estimated overall benefit must clearly reflect contract income. For example, in the case of a road builder, a completion standard based exclusively on kilometres of road travelled in a case where the terrain is significantly different cannot clearly reflect contract revenue. (C) New Taxpayer. The partner who receives the distributed contract is considered a new subject for the purposes of paragraph (k) (2) (iii) of this section. To determine the price of the overall contract (or the price of the gross contract) covered in paragraph (2) (iii) of this section, the basis of the new subject is covered in the contract (including, if applicable, the assets not consumed) after distribution (in accordance with Section 732) as consideration paid by the new subject and to be paid into the contract. Therefore, the price of the total contract (or the gross contract price) of the new contract is reduced immediately after distribution by the partner`s contractual base (including, if applicable, the unconsumed property). Bloomberg Tax Portfolio, Accounting for Long-Term Contracts, No. 575, provides taxpayers with guidance in applying long-term contractual accounting methods. (i) scope. Unless the contrary provision of paragraph (k) (3) (v) (D) of this section, the step-in-the-shoes rules in this paragraph (k) (3) apply to subsequent transactions resulting in a change in the reporting of the tax return of a contract recorded using a long-term contractual method of accounting (step in shoe operations) – (ii).
A taxpayer makes a choice under this paragraph b) (6) using the 10 per cent method for all long-term contracts entered into during the taxable year of the election on his initial federal income tax return for the election year. This choice is an accounting method and therefore applies to all long-term contracts concluded during and after the taxable year of the election. A voting taxpayer must apply the 10 per cent method to apply the “return” method, pursuant to section 1.460-6, and determine the alternative taxable minimum income referred to in point (f) of this section. This choice is not available when a policyholder uses the simplified cost-cost method of section 1.460-5, letter c) to calculate the conclusion factor for a long-term contract. (ii) The taxpayer who is insured by a profit or loss. Where the amount at issue relates to a client`s claim of a price reduction or overwork and, regardless of the outcome of the dispute, the subject is insured with either a profit or loss of a long-term contract, the price of the gross contract, reduced by the amount reasonably disputed (but not below zero), must be taken into account during the closing year. If the amount at issue relates to the claim of a subject to a price increase and the taxpayer is assured of a profit or loss of a long-term contract, regardless of the outcome of the dispute, the price of the gross contract must be taken into account during the closing year. If the insured person is assured of a profit from the contract, all contractual costs that can be incurred until the end of the closing year will be taken into account this year.
If the insured person is assured of a loss of order, all contractual costs that can be incurred up to the end of the year of completion and reduced by the reasonably contested amount are taken into account in the closing year. Given the length of the contract and the age of the asset, it is possible that important items are obsolete, need to be replaced due to unexpected technical problems or desirable improvements may be developed.