except to the extent that such amounts are considered to be a reduction or return of consideration paid. Specifically, section 72(a) provides that unless otherwise provided, gross income includes any amount received as an annuity under an annuity contract. Section 72(b), however, provides that a portion of the annuity will be excluded from gross income. In particular, gross income does not include that part of any amount received as an annuity under an annuity contract which bears the same ratio to such amount as the investment in the contract (as of the annuity starting date) bears to the expected return under the contract (as of such date). See sec. 72(b); sec. 1.72-4, Income Tax Regs. This ratio is referred to as the "exclusion ratio." Sec. 72(b); sec. 1.72-4, Income Tax Regs. Section 72(c), as relevant here, defines the investment in the contract to be the aggregate amount of premiums or other consideration paid for the contract (or in the instant case, petitioner's after-tax basis). The “expected return" amount is determined by multiplying, at the commencement of the annuity, the total of the annuity payments to be received annually by a multiple based on the annuitant's age and, for contributions prior to 1986, on the annuitant's sex. Sec. 1.72-5(a)(1), Income Tax Regs. The application of the "exclusion ratio" to each annuity payment determines the amount excluded from the gross income of the annuitant and, thus, not subject to Federal income tax. This excluded amount represents that part of the annuity payment which accounts for the return of the annuitant's investment in the annuity. In the relevant statutes governing the determination of the taxable amount of a pension plan annuity, there is no provision for, or mention of, any adjustment to an annuitant's basis or investment in his annuity to take account of inflation from the date the annuitant first began to contribute to the annuity to the annuity starting date. Nor is there any provision permitting an adjustment to take account of inflation via a discount factor from the date of the commencement of the annuity until the nontaxable basis has been fully repaid to the annuitant. When a statute is clear on its face, we require clear, unequivocal evidence of legislative purpose before construing the statute to override the plain meaning of the words used therein. See Hirasuna v. Commissioner, 89 T.C. 1216, 1224 (1987); Huntsberry v. Commissioner, 83 T.C. 742, 747-748 (1984). The legislative history of the statutes relevant to this case contains no evidence that Congress intended that there be any adjustment to account for inflation. As with the statutes, the regulations also contain no mention of inflation adjustments. The regulations under section 72 are interpretative regulations. Such regulations must be upheld "unless unreasonable and plainly inconsistent with the revenue statutes". Commissioner v. South Tex. Lumber Co., 333 U.S. 496, 501 (1948). The regulations under section 72 are not unreasonable and are not plainly inconsistent with the statute with respect to the issue presented in the instant case. The regulations promulgated under section 72 are of long standing, originally adopted on November 14, 1956, by T.D. 6211, 1956-2 C.B. 29. While there have been numerous amendments to the regulations, none have affected the issue at bar. With respect to the longevity of these regulations, the Supreme Court has stated that longstanding rules should not be overruled except for weighty reasons. See Commissioner v. Sternberger's Estate, 348 U.S. 187, 199 (1955). As discussed below, there are no such weighty reasons in the instant case. While there are no cases directly on point dealing with pension plans or annuities,3 the issue decided in Hellermann v. Commissioner, 77 T.C. 1361 (1981), involved the same principles. In Hellermann v. Commissioner, supra, the taxpayers argued that gain that was realized from the sale of property should be adjusted to take into account the inflation 3 This Court has consistently denied taxpayers deductions for losses due to inflation and has repeatedly rejected the argument that inflation is a proper ground for failing to report income. See Sibla v. Commissioner, 68 T.C. 422, 430–431 (1977), affd. 611 F.2d 1260 (9th Cir. 1980); Gajewski v. Commissioner, 67 T.C. 181, 195 (1976), affd. without published opinion 578 F.2d 1383 (8th Cir. 1978); Bartley v. Commissioner, T.C. Memo. 1998-322; Ruben v. Commissioner, T.C. Memo. 1987-277; Downing v. Commissioner, T.C. Memo. 1983-97; Warren v. Commissioner, T.C. Memo. 1982-696; Notter v. Commissioner, T.C. Memo. 1982-96; Cunninghman v. Commissioner, T.C. Memo. 1981-365; Milkowski v. Commissioner, T.C. Memo. 1981-225; Crossland v. Commissioner, T.C. Memo. 1976-59. Other courts have reached the same conclusions when faced with similar situations. See Stelly v. Commissioner, 804 F.2d 868, 870 (5th Cir. 1986) (“The *** [taxpayers'] contention that they are entitled to an inflation adjustment to their interest income is plainly incorrect."); Birkenstock v. Commissioner, 646 F.2d 1185, 1186 (7th Cir. 1981) ("The market price of gold in terms of dollars is * * * irrelevant to the determination of * * * taxable income"), affg. T.C. Memo. 1979–201; Bates v. United States, 108 F.2d 407, 408 (7th Cir. 1939) (attaching no "significance to the statutory gold content of the dollar as a factor in the determination of gain from the sale of capital assets"); Daugherty v. United States, 1 Cl. Ct. 216, 218 (1983) (taxpayer not entitled to "inflation factor" deduction). that occurred during the ownership of the property. We disagreed. First, we relied upon "the well-established doctrine that Congress has the power and authority to establish the dollar as a unit of legal value with respect to the determination of taxable income, independent of any value the dollar might also have as a commodity." Id. at 1364. For this proposition, we relied upon cases upholding Congress' right to provide for a currency having a uniform legal value that did not necessarily correspond to the market value of gold bullion which backed the currency. See Perry v. United States, 294 U.S. 330 (1935); Nortz v. United States, 294 U.S. 317 (1935); Norman v. Baltimore & Ohio R.R. Co., 294 U.S. 240 (1935); Legal Tender Cases, 79 U.S. (12 Wall.) 457 (1870). As a second ground for rejecting the taxpayers' position in Hellermann v. Commissioner, supra, we relied upon the doctrine of common interpretation; i.e., defining income on the basis of the understanding of a lay person, not an economist. See id. at 1366. Under this doctrine, the taxpayers' gain must be measured on the basis of the nominal gain on the sale of property, not on the basis of a gain reduced by an inflation factor, or the real gain in an economic sense. See id. "[N]either the Constitution nor tax laws 'embody perfect economic theory."" Id. (quoting Weiss v. Weiner, 279 U.S. 333, 335 (1929)). In Hellermann v. Commissioner, supra, the taxpayers were arguing that the Government's failure to take inflation into account to determine gain or loss resulted in the taxation of return of capital. This is the essence of petitioner's argument in the instant case. However, as previously stated, the applicable statutes and regulations do not provide that petitioner may take inflation into account. See secs. 72, 401, and 402; Hellermann v. Commissioner, supra at 1363; secs. 1.72, 1.401, 1.402, Income Tax Regs. Accordingly, we hold that petitioner may not adjust the basis in his retirement annuity to account for inflation for purposes of calculating the amount of his pension annuity subject to Federal income tax. Decision will be entered for respondent. DAVID C. HUTCHINSON, ET AL.,1 PETITIONERS v. RESPONDENT Docket Nos. 15912-98, 15958-98, 15959-98, 15960-98. Filed March 14, 2001. Held, under the alternative cost method of Rev. Proc. 9229, 1992-1 C.B. 748, a real estate developer may allocate to its bases in lots sold $3,707,662 in estimated construction costs relating to common improvements. Held, further, $5,861,595 in estimated future-period interest expense relating to common improvements does not qualify under the alternative cost method for allocation to the developer's bases in lots sold. Neil D. Kimmelfield, for petitioners. Gerald W. Douglas and Nhi T. Luu-Sanders, for respondent. OPINION SWIFT, Judge: These cases were consolidated for trial, briefing, and opinion. For 1994, respondent determined the following deficiencies in petitioners' Federal income tax: Petitioners David C. Hutchinson Isaac M. Kalisvaart and Francien Kalisvaart-Valk Deficiency $442,746 358,095 188,862 128,054 The issues for decision involve whether, under the alternative cost method of Rev. Proc. 92-29, 1992-1 C.B. 748 (Rev. Proc. 92-29), a real estate developer, in calculating gain on the sale of residential lots sold in 1994, may allocate to the developer's bases in the lots sold estimated construc 1 Cases of the following petitioners are consolidated herewith: Isaac M. Kalisvaart and Francien Kalisvaart-Valk, docket No. 15958-98; William T. Criswell and Sharon L. Criswell, docket No. 15959-98; and Robert S. Bobosky and Judeen M. Bobosky, docket No. 15960-98. tion costs relating to certain common improvements to the development and whether the developer may include, in the calculation of estimated construction costs, estimated futureperiod interest expense relating to the common improvements. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 1994, and all Rule references are to the Tax Court Rules of Practice and Procedure. Background These cases were submitted fully stipulated under Rule 122, and the stipulated facts are so found. At the time the petitions were filed, petitioners resided in the following locations: Petitioners David Hutchinson Isaac Kalisvaart and Francien Kalisvaart-Valk ....... Robert and Judeen Bobosky Location Ketchum, Idaho On June 21, 1993, petitioners formed Valley Ranch, Inc. (VRI), as an Idaho corporation, and petitioners elected to have VRI taxed pursuant to subchapter S of the Internal Revenue Code. Petitioners constitute all of the shareholders of VRI. On December 1, 1993, VRI entered into an option to purchase a 526-acre parcel of partially developed real estate near Sun Valley, Idaho (the property). Prior to December 1, 1993, the sellers of the property had begun development of the property as a golf course residential community. Also on December 1, 1993, VRI entered into an agreement with the sellers of the property for VRI to continue to develop the property as follows: On May 5, 1994, the final plat was recorded for development of the property as a golf course residential community, and VRI exercised its option and entered into a binding agree |