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 but did not file Form 4876-A within its first 90 days. Its accounting adviser believed the law firm handling formation would help with the election, and an adviser illness contributed to the filing failure. The corporation consistently intended to be an IC-DISC and acted on that understanding. The IRS found that the regulatory-relief standards were satisfied and granted 60 days to file Form 4876-A. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation make a late IC-DISC election for its first taxable year?
• Outcome: Approved, with Form 4876-A due within 60 days.
• Key authorities: IRC § 992(b)(1)(A); 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: 201516052 Third Party Communication: None
Release Date: 4/17/2015 Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
Person To Contact:
------------------------ ---------------------------, ID No. ---------------
------------------------ ----------------
-------------------------- Telephone Number:
------------------------------ --------------------
Refer Reply To:
In re: --------------------- CC:INTL:B06
PLR-134588-14
Date:
January 15, 2015

                                                           TY: ------

                                               LEGEN-D

Taxpayer = ---------------------------------------------
Accounting Firm = ---------------------------------
Individual 1 = ------------------------
Individual 2 = --------------------
Individual 3 = --------------------
Trust = ----------------------------------------------------
Company 1 = ------------------------
Law Firm = --------------------------
Date 1 = --------------------------
Date 2 = --------------------
Date 3 = ------------------
Year 1 = ------
Year 2 = ------

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

This responds to a letter dated September 12, 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
penalties 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-134588-14 2

                                             FACTS

Taxpayer and Company 1 are domestic corporations wholly owned by Individual 1,
Individual 2, and Trust. Taxpayer was formed for the sole purpose of qualifying and
operating as an interest charge domestic international sales corporation (“IC-DISC”).
Taxpayer operates under a commission arrangement with Company 1.

Individual 3 is a partner at Accounting Firm. At the end of Year 1, Individual 3
discussed with Individual 1 and her husband the possibility of forming an IC-DISC.
Pursuant to these discussions, Individual 3 asked Law Firm to assist Individual 1 with
preparing the appropriate documents to incorporate Taxpayer under state law.
Taxpayer was formed on Date 1. Individual 3 assumed that Law Firm would also
provide assistance in filing Form 4876-A. Throughout the end of Year 1 and the
beginning of Year 2, the husband and business partner of Individual 3 had a serious
medical condition which required Individual 3 to be absent from her office for extended
periods of time. On Date 2, Individual 3 discovered that Law Firm had not assisted in
preparing Form 4876-A, and that Form 4876-A had not been filed. Individual 3 then
prepared Form 4876-A, which was signed by Taxpayer and filed on Date 3, more than
90 days after Date 1. Taxpayer intended at all times to be treated as an IC-DISC, and
acted in accord with that belief.

Taxpayer has requested a ruling that grants an extension of time of 60 days from the
date of the ruling letter to file Form 4876-A and that such filing will be treated as a timely
election to be treated as an IC-DISC for Taxpayer’s first taxable year.

                                    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.

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

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-134588-14 3

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
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.

In the present situation, the election described in Temp. Treas. Reg. § 1.921-1T(b)(1) is
a regulatory election as defined in Treas. Reg. § 301.9100-1(b). Therefore, the
Commissioner has discretionary authority under Treas. Reg. § 301.9100-1(c) to grant
Taxpayer an extension of time, provided that Taxpayer satisfies the standards for relief
set forth in Treas. Reg. § 301.9100-3.

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-134588-14 4

Pursuant to Forms 2848 (Power of Attorney and Declaration of Representative) on file
in this office, copies of this ruling letter are being furnished to your authorized
representatives.

                             Sincerely,


                             _____________________________________
                             Anne P. Shelburne
                             Senior Counsel, Branch 6
                             Office of Associate Chief Counsel (International)

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

cc: