Corporation receives more time to elect IC-DISC status

Plain-English summary

A domestic corporation was formed solely to operate as an interest charge domestic international sales corporation, or IC-DISC. Its accounting and law firms misunderstood which adviser would file Form 4876-A, so the corporation missed the election deadline even though it operated and filed its first return as an IC-DISC. The IRS concluded that the corporation acted reasonably and in good faith and granted 60 days from the ruling date to file the form. The ruling treated that filing as a timely election but did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive additional time to file Form 4876-A for its first taxable year?
• Outcome: Approved, with 60 days from the ruling date to file the election
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201502005 Third Party Communication: None
Release Date: 1/9/2015 Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
Person To Contact:
------------------------------- -----------------, ID No. ----------------
--------------------------------------- Telephone Number:
--------------------------------- --------------------
------------------------------- Refer Reply To:
CC:INTL:B06
PLR-122903-14
Date:
October 07, 2014

Legend

Taxpayer = ---------------------------------------------------------
Partnership = --------------------------------
Accounting Firm = ---------------------------------------
Law Firm = --------------------------------
Individual A = --------------------
Individual B = ---------------------
Individual C = ----------------------
Individual D = ------------------------------
Date 1 = ------------------------
Date 2 = ---------------------------
Date 3 = ---------------------------

Dear -------------------:

This responds to a letter dated June 3, 2014, submitted by Accounting Firm requesting
that the Internal Revenue Service (“Service”) grant Taxpayer an extension of time under
Treas. Reg. §§ 301.9100-1 and 301.9100-3 to file Form 4876-A (“Election To Be
Treated as an Interest Charge DISC”) for Taxpayer’s first taxable year.

The rulings contained in this letter are based upon information and representations
submitted by Taxpayer and Accounting Firm and accompanied by affidavits and penalty
of perjury statements executed by appropriate parties. This office has not verified any
of the materials submitted in support of the request for rulings. It is subject to
verification on examination.
PLR-122903-14 2

                                             FACTS

Taxpayer is a domestic corporation wholly owned by Partnership. Individuals A, B, C,
and D hold equal partnership interests in Partnership. Individual D’s partnership interest
is held through a trust. Taxpayer was incorporated on Date 1 for the sole purpose of
qualifying and operating as an interest charge domestic international sales corporation
(“IC-DISC”).

Shortly before Date 1, Accounting Firm advised Individual A of benefits that an IC-DISC
may provide. Partnership engaged Accounting Firm and Law Firm to form Taxpayer as
an IC-DISC. Upon formation, Taxpayer operated as an IC-DISC. Due to a
misunderstanding between Law Firm and Accounting Firm about who was responsible
for filing the Form 4876-A, Taxpayer inadvertently failed to timely file a Form 4876-A.

On Date 2, Accounting Firm filed Taxpayer’s first federal income tax return using Form
1120-IC-DISC. At this time, Accounting Firm and Law Firm discovered that a Form
4876-A had not been filed. A few days later, on Date 3, Accounting Firm filed a Form
4876-A on behalf of Taxpayer.

In order to operate as an IC-DISC beginning on Date 1, Taxpayer requested a ruling
granting an extension of time to file Form 4876-A for its first taxable year.

                                    LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code (the “Code”) provides that an
election by a corporation to be treated as a DISC1 shall be made by such corporation
for a taxable year at any time during the 90-day period immediately preceding the
beginning of the taxable year, except that the Secretary may give his consent to the
making of an election at such other times as he may designate.

Section 992(b)(1)(B) of the Code provides that such election shall be made in such
manner as the Secretary shall prescribe and shall be valid only if all persons who are
shareholders in such corporation on such first day of the first taxable year for which
such election is effective consent to such election.

Temporary Treasury Regulation § 1.921-1T(b)(1) provides, in part, that a corporation
electing IC-DISC status must file Form 4876-A and that a corporation electing to be
treated as an IC-DISC for its first taxable year shall make its election within 90 days
after the beginning of that year.

Treasury Regulation § 301.9100-1(c) provides, in part, that the Commissioner, in
exercising the Commissioner’s discretion, may grant a reasonable extension of time

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-122903-14 3

under the rules set forth in Treas. Reg. §§ 301.9100-2 and 301.9100-3 to make a
regulatory election under all subtitles of the Code except subtitles E, G, H, and I.

Treasury Regulation § 301.9100-1(b) provides that a regulatory election is an election
whose due date is prescribed by a regulation published in the Federal Register, or a
revenue ruling, revenue procedure, notice, or announcement published in the Internal
Revenue Bulletin. For this purpose, an election includes an application for relief in
respect of tax.

Treasury Regulation § 301.9100-3(a) provides that requests for extensions of time for
regulatory elections that do not meet the requirements of Treas. Reg. § 301.9100-2
(automatic extensions) must be made under the rules of Treas. Reg. § 301.9100-3.
Requests for relief subject to Treas. Reg. § 301.9100-3 will be granted when the
taxpayer provides the evidence (including affidavits described in Treas. Reg.
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and that the grant of relief will not prejudice the
interests of the Government.

Based on the facts and representations submitted with Taxpayer’s ruling request, we
conclude that Taxpayer satisfies Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayer is
granted an extension of time of 60 days from the date of this ruling letter to file Form
4876-A. Such filing will be treated as a timely election to be treated as an IC-DISC for
Taxpayer’s first taxable year.

The granting of an extension in this ruling letter is not a determination that Taxpayer is
otherwise eligible to make the election or to claim IC-DISC status or benefits. See
Treas. Reg. § 301.9100-1(a). Taxpayer should attach a copy of this ruling letter to its
Federal income tax return for the taxable years to which this letter applies.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent. Except as expressly provided
herein, no opinion is expressed or implied concerning the tax consequences of any
aspect of any transaction or item discussed or referenced in this letter.
PLR-122903-14 4

Pursuant to a Power of Attorney on file in this office, a copy of this ruling letter is being
furnished to your authorized representative.

                                Sincerely,


                                _________________________
                                Joseph P. Dewald
                                Senior Technical Reviewer, Branch 6
                                Office of Associate Chief Counsel (International)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes

cc: