Completing Form 1120-IC-DISC: Navigating Complex Schedules and Transfer Pricing Elections

Tying Intercompany Transfer Information to the IC-DISC Tax Return

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, January 19, 2017
Recorded event now available


This webinar will provide corporate tax advisers and compliance professionals with a thorough and practical guide to meeting the tax compliance challenges of an Interest Charge Domestic International Sales Corporation (IC-DISC) Return. The panel will offer step-by-step guidance to completing a Form 1120-IC-DISC, using completed sample forms as illustrations. The panel will review the additional forms and schedules that must be filed to accompany the Form 1120-IC-DISC.

Description

Formation of an IC-DISC company provides significant tax benefits for U.S. businesses engaged in export activities, but they also offer accounting and compliance challenges for tax advisers. A critical task for tax advisers is allocating profits between the DISC and its related U.S. supplier to maximize the taxable income of the DISC and minimize the income of the supplier, while withstanding IRS scrutiny. Tax advisers also must ensure that the DISC does not become disqualified due to failure to meet both the 95% asset and income tests and follow required corporate formalities.

IC-DISC taxable activities are reported on a Form 1120-IC-DISC. The form contains a number of complexities, particularly concerning how to calculate intercompany pricing, which tax advisers and compliance professionals need to thoroughly understand to maximize tax benefits for the DISC company. Because a number of the schedules within Form 1120-IC-DISC are not commonly found on other corporate tax returns, the compliance and reporting tasks for an IC-DISC company can challenge even experienced tax advisers.

Two schedules that stand out as being particularly difficult and integral parts of the IC-DISC return are Schedule J, Deemed and Actual Distributions and Deferred DISC Income for the Tax Year, and Schedule P, Intercompany Transfer Price or Commission.

Listen as our experienced panel provides practical guidance to help you master the calculations, schedules and elections needed to accurately file a Form 1120-IC-DISC Tax Return.

Outline

  1. Structure of Form 1120-IC-DISC
  2. Verifying DISC qualification as part of the compliance process
    1. The 95% Asset Test
    2. Ensuring the DISC follows corporate formalities
    3. Separate books and records requirements
  3. Calculating DISC taxable income
    1. Pricing rules and administrative pricing methods
    2. Combined taxable income determination
    3. Reporting on Page 1 and Schedules A through E
  4. Schedule J, Deemed and Actual Distributions
  5. Reconciliation schedules and schedule M-4 analysis of accumulated IC-DISC income
  6. Schedule P, Intercompany Transfer Price of Commission
  7. Illustration of completed return and schedules

Benefits

The panel will discuss these and other important topics:

  • Maximizing IC-DISC taxable income while minimizing related supplier’s taxable income
  • Defining and calculating combined taxable income
  • Electing pricing method for intercompany transfer price
  • Navigating the complexity of Schedule J, Deemed and Actual Distributions and Deferred DISC Income
  • Taking calculations and reporting them onto the various schedules of Form 1120-IC-DISC

Learning Objectives

After completing this course, you will be able to:

  • Verify the events and conditions that can disqualify a DISC, such as failure to meet the 95% asset test or required corporate formalities.
  • Recognize available pricing methods for calculating IC-DISC Combined Taxable Income
  • Distinguish between related suppliers and nonrelated suppliers for purposes of utilizing intercompany pricing rules
  • Identify method for calculating deemed and actual distributions to report on Form 1120-IC-DISC Schedule J
  • Decide which method is appropriate for calculating and reporting intercompany transfer price or commission on Schedule P

Faculty

James Loizeaux, Managing Director, Global Tax Services
CliftonLarsonAllen, Minneapolis

Mr. Loizeaux has more than 25 years of public accounting and industry experience in international corporate tax. He has extensive technical expertise in complex international compliance, repatriation strategies, structuring foreign operations and exports – IC DISC. Prior to joining CLA, he was a Director with a major accounting firm and was the international tax manager for a multinational company responsible for the management of research, planning and compliance for foreign tax matters in foreign jurisdictions and related to U.S. income taxes. 

Margaret (Peggy) Nowak, EA, MST, Director, International Tax
CliftonLarsonAllen, Oak Brook, Ill.

Ms. Nowak has over 20 years of experience performing tax services, the majority of which was spent in International Tax at Big Four accounting firms. Prior to joining CLA, she was a director in international tax at one of the largest accounting firms and sat on a national platform that assisted with international tax technical issues, tax technology and project management. Her international corporate tax experience focuses on export incentives/ IC DISC, repatriation of earnings, foreign tax credit planning, structuring foreign operations, inbound/outbound tax compliance, treaty analysis, FATCA, and global mobility services.


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