Special Industries

Common Improvements Considered in Home Construction Contract Completion

In determining whether a contract qualifies as a home construction contract, taxpayers may include costs attributable to common improvements and development of infrastructure in the estimated costs. However, the IRS and taxpayers have long disagreed as to whether these costs are included in the tests for determining the date a contract is complete.

IRS Provides Safe-Harbor Methods for Auto Dealers Using UNICAP

Rev. Proc. 2010-44 resolves some of the issues raised by TAM 200736026 involving UNICAP issues affecting automobile dealerships; specifically, whether the installation of parts on customer-owned vehicles, and on taxpayer-owned vehicles, constitutes “production” for purposes of the UNICAP regulations.

The Blurred Line Between Production and Handling Costs

On September 15, 2009, the IRS announced in a field directive that it was temporarily suspending the examination of Sec. 263A (UNICAP) issues involving automobile dealerships. The suspension will end on December 31, 2010.

Unit of Property for Network Assets

Treasury issued proposed regulations under Secs. 162 and 263(a) providing guidance on the capitalization and deduction of costs relating to tangible property. Included in these regulations are the “repair regulations,” a comprehensive set of rules for determining whether costs incurred for tangible property are deductible repairs or capital improvements.

Electric Utility Refunds Qualify for Sec. 1341 Tax Mitigation

In a recent private letter ruling, the IRS determined that a publicly regulated utility is entitled to claim benefits under Sec. 1341 for amounts paid to a purchaser of electricity to settle claims asserted against predecessor members of the publicly regulated utility’s affiliated group.

Recognizing Unbilled Revenue

The IRS has applied the all-events test for income recognition to service contacts that were subject to the Federal Acquisition Regulations.

Prop. Regs. Broaden Scope of Home Construction Contract Exemption

The IRS issued proposed regulations expanding the types of contracts eligible for the home construction contract exemption from the percentage of completion method and amending the rules for taxpayer-initiated changes in methods of accounting to comply with Sec. 460 and the regulations thereunder.

Homebuilder Status

A homebuilder’s home construction contracts are exempt from the long-term contract provisions of Sec. 460 and so are not subject to the percentage of completion method for regular tax or AMT purposes or to the lookback rules for either regular tax or AMT purposes. Further, a home construction contract is exempt from the cost allocation rules of Sec. 460.

Newsletter Articles


Traps for the unwary: Tax Cuts and Jobs Act changes

By now many of us are familiar with the various provisions of the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. Here is a list of changes together with (perhaps) unexpected nuances.


Qualified business income deduction regs. and other guidance issued

The package includes final regulations, guidance on how to calculate W-2 wages, a safe-harbor rule for rental real estate businesses, and new proposed rules on the treatment of previously suspended losses.