Corporation received 60 days to make IC-DISC election

Plain-English summary

A domestic corporation was formed solely to operate as an interest charge domestic international sales corporation. Its accounting and law firms each believed the other had filed Form 4876-A, so the corporation missed the election filing. The accounting firm discovered the error before the corporation's first tax return was due, and the corporation promptly requested relief. The IRS found that the corporation acted reasonably and in good faith and that relief would not prejudice the government. It granted 60 days to file Form 4876-A, which would be treated as a timely IC-DISC election for the corporation's first tax year.

Ruling snapshot

• Question: Could the corporation file a late Form 4876-A to elect IC-DISC treatment for its first taxable year?
• Outcome: Approved, 60-day extension
• Key authorities: IRC § 992(b)(1); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201622022                                              Third Party Communication: None
Release Date: 5/27/2016                                        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-130122-15
In Re: ---------------------                                   Date:
                                                               February 24, 2016




                                                    LEGEND

Taxpayer=                  ---------------------
Accounting Firm=           ------------------------------------------------------------
Law Firm=                  ----------------------------------------------
Corporation=               ---------------------------------------
Shareholder A=             ------------------------------------------------------------------
Shareholder B=             -------------------------------------------------------------------
Individual=                -----------------------
Year 1=                    ------
Date 1=                    -----------------------
Month 1=                   ----------------


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

This responds to a letter dated September 2, 2015, supplemented by a letter dated
January 15, 2016, 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-130122-15                                         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 Individual. Corporation is owned by Individual,
Shareholder A, and Shareholder B. Shareholder A and Shareholder B are grantor
trusts that are owned by Individual.

In Year 1, Accounting Firm advised Individual of the benefits associated with operating
an IC-DISC. After deciding to form Taxpayer as an IC-DISC, Individual retained Law
Firm to organize Taxpayer as an IC-DISC and prepare the required incorporation
documents. Taxpayer relied on Accounting Firm and Law Firm to organize and to
prepare all documents and filings needed to establish Taxpayer as an IC-DISC.

Due to a miscommunication, Accounting Firm believed Law Firm filed Form 4876-A on
Taxpayer’s behalf. However, Law Firm believed that Accounting Firm filed Form 4876-
A on behalf of Taxpayer. As a result, a Form 4876-A for Taxpayer was not filed.

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.
During Month 1, which was 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-130122-15                                 3

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
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.
PLR-130122-15                                    4

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

                                    Sincerely,


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

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



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