# Prop. Treas. Reg. § 1.460-5: Cost allocation rules.

Proposed regulation, not in force. REG-120844-07, 73 FR 45180, published 2008-08-04 <https://www.federalregister.gov/documents/2008/08/04/E8-17830/rules-for-home-construction-contracts>. Interprets 26 U.S.C. § 460.

Par. 4. Section 1.460-5 is amended by: 1. Adding a new sentence to the end of paragraph (c)(2). 2. Revising paragraph (g). The revision and addition read as follows:

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(c) * * *

(2) * * * Further, this election is not available if a taxpayer is changing from a cost allocation method other than as prescribed in paragraph (b) of this section, in which case the taxpayer must follow the procedures under § 1.446-1(e) for obtaining the Commissioner's consent for the change in method of accounting.

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(g) Method of accounting. A taxpayer that adopts, elects, or otherwise changes to a cost allocation method of accounting (or changes to another cost allocation method of accounting with the Commissioner's consent) must apply that method consistently for all similarly classified contracts, until the taxpayer obtains the Commissioner's consent under section 446 to change to another cost allocation method. A taxpayer-initiated change in cost allocation method from a method that does not comply with the cost allocation rules of this section to a method that complies with the cost allocation rules of this section must be applied to all long-term contracts to which the rules of this section apply, including contracts entered into before the year of change and not reported as completed as of the beginning of the year of change. Accordingly, a section 481(a) adjustment is required. Any other taxpayer-initiated change in cost allocation method to a method permitted under the rules of this section must be made on a cut-off basis and applied only to contracts entered into during and after the year of change, in which case a section 481(a) adjustment will be neither permitted nor required.