[Anonymous]

From what I understand…. Completed contract can be used for tax purposes if the contract is under two years, otherwise percentage of completion must be used…is there more to this or is this incorrect? TIA.

[Tncincy]

If you referring to pre-ace adjustment, construction must use % of completion method…if not your question is missing information.

It begins with a 75
Been here too long as a cheerleader.....time to pass

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Anonymous]

Not talking about AMT…just talking about for regular tax accounting

[Last Chance CPA]

To tncincy's point, I think completed contract vs % completed only comes up during AMT and ACE discussions. You apply 75% ACE rules to add back completed contract to AMT. Maybe I am wrong?

AUD - 75
BEC - 75
FAR - 76
REG - 76

I want those initials next to my name!!!!

FAR - 76
AUD - 75
BEC - 75
REG - 76

Now I need some experience!!! And some networking...

[Anonymous]

There's a 3 year construction contract. Total cost on day one are estimated at 20,000 and sales price is 25,000….on year one the crew saw 6,000 worth of cost….how much revenue is recognized for tax purposes?

my guess is 1,200? …i made this question up but this is pretty much what i was asking….for a question like this i'm assuming that you are not allowed to not recognize any revenue for taxes purposes in year 1 and 2? In other words, completed contract method isn't allowed for contracts over two years? Anyone follow me?

[Anonymous]

I saw some questions about this that weren't in regards to AMT

[Anonymous]

I saw some questions about this that weren't in regards to AMT

[Anonymous]

anyone?

[PasstheCPA7]

@ cpanj: Both U.S. GAAP and Tax uses percentage of completion, and the profit is recognized the same way under both. Are you familiar with how to do percentage of completion under U.S. GAAP? It's the same way under Tax.

[Last Chance CPA]

Yep. I think learning % of completion vs completed contract the same way you did for FAR would be sufficient. But again, I think it only will really show up in reference to AMT and ACE…

AUD - 75
BEC - 75
FAR - 76
REG - 76

I want those initials next to my name!!!!

FAR - 76
AUD - 75
BEC - 75
REG - 76

Now I need some experience!!! And some networking...

[Anonymous]

To use the completed contract method you must meet 3 tests: 1) the contract must be a construction contract (manufacturing are ineligible); 2) when entered into, the contractor must estimate that the contract will be completed within two years; and 3) the contractor's average annual gross receipts for the 3 tax years prior to the contract commencement date cannot exceed $10M.

I have many construction clients that use the completed contract method (available for regular tax only). Just an added note – when a contract is >95% complete, we have to include the revenue & costs in the calculation. Most of the time the books are on a % completion method & we have an M-1 item for the completed contract conversion.

Hope this helps!

[Author]

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