Guy F. Atkinson Company of California and Subsidiaries v. Commissioner of Internal Revenue Service

Guy F. Atkinson Co. [“Atkinson”] appeals from a determination by the United States Tax Court of a $4,115,981 tax deficiency. We have jurisdiction under 26 U.S.C. § 7482 . We affirm.

FACTS AND PROCEEDINGS:

Atkinson’s subsidiary, Walsh Construction Co., was managing partner in a joint venture, Water Tunnel Contractors [“WTC”] WTC was organized to construct a water tunnel for New York City. WTC submitted winning bids approximating $222 million for the contracts related to the water tunnel project. In its 1970 federal partnership income tax return, WTC elected to report income and expenses arising from the project under the completed contract method of accounting as set forth in the Treasury Regulations. Under this method of accounting, all income and expenses derived from a long-term contract are reported only in the year in which the contract is completed, permitting reporting of income and expenses on a transactional rather than an annual basis. “Completion” of a long-term contract occurs upon final completion and acceptance. Where disagreement arises as to completion, “dispute” provisions provide for reporting of gain or loss on or after the taxpayer “tenders” the subject matter…