Alsup

Appellant (herein called the taxpayer) sued for the recovery of excess profits taxes for the year 1945 alleged to have been erroneously and illegally assessed and collected. The appeal is from a judgment denying recovery.

The facts are not in dispute. Taxpayer is a building contractor in Hawaii. Since its incorporation in 1926 it has consistently made its Federal tax returns on the “completed contract basis” pursuant to Regulation 111, section 29.42-4 (b) promulgated under 26 U.S.C.A. §§ 41 and 42. So far as material here the regulation reads:

On July 28, 1944 the taxpayer contracted with the Federal Public Housing Authority to construct a housing project. The contract provided for final payment when the construction was completed and accepted by the Authority. On April 30, 1945 the taxpayer requested of the Authority final payment in the amount of $44,533.50. On November 5, 1945 the Authority allowed $44,000.00 of the sum, withholding the balance of $533.50 until completion of the installing of thermostat units for the fire alarm system in the project’s community building. These thermostats were not installed until March of 1946; and on June 26, 1946 the Authority paid the…