Common use of Deduction items Clause in Contracts

Deduction items. Except as other- wise provided in this section, any item of deduction properly taken into ac- count during the recognition period is recognized built-in loss if the item would have been properly allowed as a deduction against gross income before the beginning of the recognition period to an accrual method taxpayer (dis- regarding any method of accounting for which an election by the taxpayer must be made unless the taxpayer ac- tually used the method when it was a C corporation). In determining whether an item would have been properly al- lowed as a deduction against gross in- come by an accrual method taxpayer for purposes of this paragraph, section 461(h)(2)(C) and § 1.461–4(g) (relating to liabilities for tort, worker’s compensa- tion, breach of contract, violation of law, rebates, refunds, awards, prizes, jackpots, insurance contracts, war- ranty contracts, service contracts, taxes, and other liabilities) do not apply.