Corporation receives late IC-DISC election relief

Plain-English summary

A newly formed domestic corporation intended to elect interest charge DISC status for its first tax year. Its advisers prepared Form 4876-A, but the form was not signed or filed within 90 days after formation because the president became gravely ill and the companies' affairs fell into disarray. The IRS concluded that the corporation met the standards for regulatory-election relief and granted 60 days to file the form. The ruling treated that filing as timely but did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201701010
Third Party Communication: None
Release Date: 1/6/2017
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-123260-16 Date:
October 03, 2016

TY: -------
Legend

Taxpayer = -------------------------------------------
Accounting Firm = -------------------
Law Firm = -----------------------
Company = ------------
Date 1 = ---------------------------
Year 1 = -------

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

This responds to a letter dated July 12, 2016 submitted by your representatives 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 Year 1, Taxpayer’s first taxable year.

The ruling contained in this letter is based upon information and representations submitted by Taxpayer 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 a ruling. It is subject to verification on examination.

FACTS

Taxpayer is a domestic corporation that is wholly-owned by Company. On Date 1, Taxpayer was formed to serve as an interest charge domestic international sales
PLR-123260-16
2

corporation (“IC-DISC”) that would sell metal components produced by Company on a commission basis.

Taxpayer engaged Accounting Firm and Law Firm to perform all necessary steps and prepare all necessary forms to qualify Taxpayer as an IC-DISC. Law Firm prepared and delivered Form 4876-A to Taxpayer to be signed by the president of Company and Taxpayer. However, due to a grave illness incapacitating the president, the affairs of both Company and Taxpayer were thrown into disarray. As a result, the Form 4876-A was not signed or filed within 90 days after Date 1.

After Accounting Firm had prepared the Form 1120 IC-DISC for Year 1, based on the assumption that Form 4876-A had been timely filed, Taxpayer’s representative, operating under the same belief, signed and then submitted the Form 1120 IC-DISC to the Service. Taxpayer subsequently received a notice from the Service indicating that it had no record of the filing of a Form 4876-A. Accounting Firm then advised Taxpayer to file a request for relief under Treasury Regulation § 301.9100-1(c). Accordingly, Taxpayer requested a ruling granting an extension of time to file Form 4876-A for Year 1, its first taxable year.

LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code1 provides that an election by a corporation to be treated as a DISC2 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.

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.

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.

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.

1
All section references are to the Internal Revenue Code.
2
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-123260-16
3

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.

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 year 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-123260-16
4

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

Sincerely,

_______
Marissa K. Rensen
Senior Counsel, Branch 6
Office of Associate Chief Counsel (International)

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

cc: