Classifying contracts
Classifying contracts (1)In general.After applying the severing and aggregating rules ofparagraph (e)of this section, a taxpayer must determine the classification of a contract (e.g.,as a long-term manufacturing contract, long-term construction contract, non-long-term contract) based on all the facts and circumstances known no later than the end of the contracting year. Classification is determined on a contract-by-contract basis. Consequently, a requirement to manufacture a single unique item under a long-term contract will subject all other items in that contract to section 460.