Get 2001 Form 8404, (fill-in Version). Interest Charge On Disc-related Deferred Tax Liability

Shareholders of Interest Charge Domestic International Sales Corporations (IC-DISCs) use Form 8404 to figure and report their interest owed on DISC-related deferred tax liability. Interest Charge on DISC-Related Deferred Tax Liability - IRS IRS (.gov) https://.irs.gov › pub › f8404_accessible IRS (.gov) https://.irs.gov › pub › f8404_accessible PDF

The operating company pays a tax-deductible commission to the IC-DISC equal to the greater of 4% of operating company's gross receipts from qualified exports or 50% of the operating company's net income from qualified exports.

How is the IC-DISC commission calculated? The sales commission paid to the IC-DISC is calculated using one of three permissible methods: (1) 4% of qualified export receipts; (2) 50% of the combined taxable income from export sales; or (3) the arm's length amount determined under section 482.

An IC-DISC is a domestic corporation, which has elected IC-DISC status and annually meets specific requirements under U.S. tax law and generally operates by the terms of related-party agreements. An IC-DISC is not generally required to perform substantial economic functions.

When closely-held C corporations utilize an Interest Charge – Domestic International Sales Corporation (“IC-DISC”), it is fairly common to deal with deferred DISC income. This occurs when the IC-DISC chooses not to distribute income to its shareholder(s) but instead, retain it as accumulated IC-DISC income. Deferred Income and Tax Liability Treatment - McGuire Sponsel McGuire Sponsel https://mcguiresponsel.com › blog › deferred-income-... McGuire Sponsel https://mcguiresponsel.com › blog › deferred-income-...

Generally, shareholders of interest charge domestic international sales corporations (DISCs) must pay interest each year on the product of the amount of the shareholder's DISC-related deferred tax liability for the year and the base period T-bill rate (IRC § 995(f)(1)). Interest on DISC-Related Deferred Tax Liability - CCH AnswerConnect cch.com https://answerconnect.cch.com › federal › irc › explanation cch.com https://answerconnect.cch.com › federal › irc › explanation

IC-DISCs are tax-exempt corporate entities that act as sales commission agents for export businesses. IC-DISCs don't have to have employees, office space, provide any services or participate in sales; they are created solely to give exporters a mechanism to legally reduce federal tax liabilities.