Treatment of certain long-term contracts

In the case of any long-term contract entered into by the taxpayer on or after March 1, 1986 , the taxable income from such contract shall be determined under the percentage of completion method of accounting (as modified by section 460(b)). For purposes of the preceding sentence, in the case of a contract described in section 460(e)(1), the percentage of the contract completed shall be determined under section 460(b)(1) by using the simplified procedures for allocation of costs prescribed under section 460(b)(3). The first sentence of this paragraph shall not apply to any residential construction contract (as defined in section 460(e)(4)).