Percentage-of-completion method
Percentage-of-completion method (1)In general.Under the PCM, a taxpayer generally must include in income the portion of thetotal contract price,as defined inparagraph (b)(4)(i)of this section, that corresponds to the percentage of the entire contract that the taxpayer has completed during the taxable year. The percentage of completion must be determined by comparing allocable contract costs incurred with estimated total allocable contract costs. Thus, the taxpayer includes a portion of the total contract price in gross income as the taxpayer incurs allocable contract costs.