Contract commencement date
(7) Contract commencement date. The contract commencement date is the date that a taxpayer or related party first incurs any allocable contract costs, such as design and engineering costs, other than expenses attributable to bidding and negotiating activities. Generally, the contract commencement date is relevant in applying 1.460-6(b)(3) (concerning the de minimis exception to the look-back method under section 460(b)(3)(B)); 1.460-5(b)(2)(v)(B)(1)(i) (concerning the production period subject to interest allocation); 1.460-2(d) (concerning qualified ship contracts); and 1.460-3(b)(1)(ii) (concerning the construction period for exempt construction contracts). (8) Incurred. Incurred has the meaning given in 1.461-1(a)(2) (concerning the taxable year a liability is incurred under the accrual method of accounting), regardless of a taxpayer's overall method of accounting. See 1.461-4(d)(2)(ii) for economic performance rules concerning the PCM. (9) Independent research and development expenses. Independent research and development expenses are any expenses incurred in the performance of research or development, except that this term does not include any expenses that are directly attributable to a particular long-term contract in existence when the expenses are incurred and this term does not include any expenses under an agreement to perform research or development. (10) Long-term contract methods of accounting. Long-term contract methods of accounting, which include the PCM, the CCM, the PCCM, and the exempt-contract percentage-of-completion method (EPCM), are methods of accounting that may be used only for long-term contracts.