Corporation receives more time to elect IC-DISC status

Plain-English summary

A corporation was formed to operate as an interest charge domestic international sales corporation, or IC-DISC. Its owners signed Form 4876-A and believed their accounting firm would timely file it, but the IRS and the corporation later found no record of the filing. The corporation represented that a late election would not prejudice the government or put it in a better position than a timely election would have. The IRS granted 60 days from the ruling date to file Form 4876-A and have it treated as timely for the corporation's first tax year, without deciding whether the corporation otherwise qualified for IC-DISC status.

Ruling snapshot

• Question: May the corporation file a late Form 4876-A election for IC-DISC treatment?
• Outcome: Approved, with a 60-day filing period
• Key authorities: IRC § 992(b)(1); 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: 201506006 Third Party Communication: None
Release Date: 2/6/2015 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-124976-14

                                                    Date:
                                                    October 29, 2014




                                                    TY: ------

Legend

Taxpayer = --------------------------------------
Accounting Firm = ----------------------------------------------
Law Firm = ------------------------------------------------
Company = ---------------------------------------------------------
Individual A = --------------------
Individual B = -------------------
Year 1 = ------
Date 1 = ---------------------

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

This responds to a letter dated March 7, 2014, submitted by Taxpayer 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 accompanied by 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.

                              FACTS AND REPRESENTATIONS

Taxpayer is a domestic corporation wholly owned and managed by Individuals A and B.
Taxpayer was formed to serve as an interest charge domestic international sales

PLR-124976-14 2

corporation (“IC-DISC”) and has established a commission arrangement with Company.
Individuals A and B also own all of the outstanding stock of Company.

In Year 1, Individuals A and B consulted with Accounting Firm and Law Firm and
decided to establish an IC-DISC and engaged Law Firm to complete the necessary
organizational documents. Taxpayer was incorporated on Date 1 and began operating
as an IC-DISC. Individuals A and B signed a completed Form 4876-A and believed
that Accounting Firm would file the election in a timely manner to qualify Taxpayer as an
IC-DISC for its first taxable year. However, after Taxpayer filed its federal income tax
return for its first taxable year, the Service informed the Taxpayer that there was no
record that the election was actually filed, and Taxpayer determined that it had no
record of the filing either.

Taxpayer represents that the extension does not prejudice the Government’s interests
and that Taxpayer is not placed in a better position by making the election at this time
than it would have been in had the election been timely made.

                                    LAW AND ANALYSIS

Section 992(b)(1)(A) 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) 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.

Temp. Treas. Reg. § 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.

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

Treas. Reg. § 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

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

PLR-124976-14 3

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.

Treas. Reg. § 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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                Sincerely,


                                _____________________________________
                                Christopher J. Bello
                                Chief, Branch 6
                                Office of Associate Chief Counsel (International)

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