Extension granted after adviser missed IC-DISC election

Plain-English summary

A corporation was formed solely to operate as an IC-DISC and relied on its law and accounting firms to complete the necessary filings. The corporation was unaware that Form 4876-A was separately required, and the accounting firm missed the 90-day election period because of an internal error. After discovering the omission before the first-year return was due, the taxpayer requested relief. The IRS granted 60 days to file Form 4876-A and have it treated as a timely first-year IC-DISC election, without deciding substantive eligibility.

Ruling snapshot

• Request: Extend the time to file Form 4876-A for the corporation’s first taxable year
• Outcome: Approved; 60 days to make a timely treated IC-DISC election
• Key authorities: I.R.C. § 992(b)(1); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201544010                                              Third Party Communication: None
Release Date: 10/30/2015                                       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
In Re: ---------------------------------------------           PLR-104258-15
                                                               Date:
                                                               July 29, 2015


                                                    LEGEND

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


Dear . -------:

This responds to a letter dated January 22, 2015, 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-104258-15                                         2


                                                 FACTS

Taxpayer is a domestic corporation and was formed on Date 1 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 Corporation.
Taxpayer is wholly owned by Corporation and Corporation is wholly owned by
Individual.

In Year 1, Accounting Firm advised Corporation of the benefits associated with
operating an IC-DISC. After deciding to form Taxpayer as an IC-DISC, Corporation
retained Law Firm to organize Taxpayer as an IC-DISC and prepare the required
incorporation documents. Law Firm prepared the incorporation documents and
Individual executed those documents on Date 1. On Date 2, Taxpayer forwarded the
entity formation documents to Accounting Firm with the expectation that any further
required steps would be performed by Accounting Firm. Taxpayer was not aware that a
separate election on Form 4876-A was required. Taxpayer relied on Law Firm and
Accounting Firm to organize and to prepare all documents and filings needed to
establish Taxpayer as an IC-DISC. Due to an internal error, Accounting Firm failed to
file Form 4876-A as required within the 90-day election period.

Believing all the requirements to conduct business and be treated as an IC-DISC for its
first taxable year were satisfied, Taxpayer began operating as an IC-DISC on Date 1. In
Date 3, which occurred before Taxpayer’s tax return for its first taxable year was due,
Accounting Firm discovered that a Form 4876-A for Taxpayer had not been filed.

Upon discovery of this error, and 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.

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

PLR-104258-15                                 3


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
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-104258-15                                    4


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

                                    Sincerely,


                                    _____________________________________
                                    Angela E. Holland
                                    Acting Assistant to the Branch Chief, Branch 6
                                    Office of Associate Chief Counsel (International)

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

cc: