Common use of Production by related parties Clause in Contracts

Production by related parties. To xx- xxxxxxx the time normally required to complete an item, a taxpayer must consider all relevant production activi- ties performed and costs incurred by itself and by related parties, as defined in § 1.460–1(b)(4). For example, if a tax- payer’s item requires a component or subassembly manufactured by a related party, the taxpayer must consider the time the related party takes to com- plete the component or subassembly and, for purposes of determining the beginning of an item’s production pe- riod, the costs incurred by the related party that are allocable to the compo- nent or subassembly. However, if both requirements of the exception for com- ponents and subassemblies under § 1.460–1(g)(1)(ii) are satisfied, a tax- payer does not consider the activities performed or the costs incurred by a related party when determining the normal time to complete an item.