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Unless it is a qualifying taxpayer or a

of any provision of the Internal Revenue

architectural services described in item 7

qualifying small business taxpayer, an

Code. Usually, records that support an

Qualified export

receipts, earlier, or

IC-DISC must use the accrual method for

item of income, deduction, or credit on the

managerial services in furtherance of the

sales and purchases of inventory items.

return must be kept for 3 years from the

production of qualified export receipts

See

Cost of Goods

Sold, later.

date the return is due or filed, whichever is

described in items 1, 2, 3, and 7, earlier.

A member of a controlled group may

later. Keep records that verify the

3. Accounts receivable produced by

not use an accounting method that would

IC-DISC's basis in property for as long as

transactions listed under

Qualified export

distort any group member's income,

they are needed to figure the basis of the

receipts, items 1–4, 7, or 8, earlier.

including its own. For example, an

original or replacement property.

4. Temporary investments, such as

IC-DISC acts as a commission agent for

money and bank deposits, in an amount

The IC-DISC should keep copies of all

property sales by a related corporation

reasonable to meet the IC-DISC's needs

filed returns. They help in preparing future

that uses the accrual method and pays the

for working capital.

and amended returns and in the

IC-DISC its commission more than 2

calculation of earnings and profits.

5. Obligations related to a producer's

months after the sale. In this case, the

loan.

IC-DISC should not use the cash method

Definitions

of accounting because that method

6. Stock or securities of

a related

materially distorts its income.

The following definitions are based on

foreign export corporation

(defined later).

sections 993 and 994.

Change in accounting method. To

7. Certain obligations that are issued

change its method of accounting used to

or insured by the U.S. Export-Import Bank

Note. “United States,” as used in the

report taxable income, for income as a

or the Foreign Credit Insurance

following instructions, includes Puerto

Association and that the IC-DISC acquires

whole or for the treatment of any material

Rico and U.S. possessions, as well as the

from such bank or association or from the

item, the IC-DISC must file Form 3115,

50 states and the District of Columbia.

Application for Change in Accounting

person who sold or bought the goods or

Section 993

Method.

services from which the obligations arose.

See Form 3115 and Pub. 538,

8. Certain obligations held by the

Qualified export receipts. Qualified

IC-DISC that were issued by a domestic

Accounting Periods and Methods, for

export receipts are any of the following.

more information on accounting methods.

corporation organized to finance export

1. Gross receipts from selling,

property sales under an agreement with

exchanging, or otherwise disposing of

Accounting Periods

the Export-Import Bank under which the

export property.

domestic corporation makes export loans

An IC-DISC must figure its taxable income

2. Gross receipts from leasing or

that the Export-Import Bank guarantees.

on the basis of a tax year. A tax year is the

renting export property that the lessee

9. Amounts (other than reasonable

annual accounting period an IC-DISC

uses outside the United States.

working capital) on deposit in the United

uses to keep its records and report its

3. Gross receipts from supporting

States used to acquire qualified export

income and expenses. Generally,

services related to any qualified sale,

assets within the time provided by

IC-DISCs may use a calendar year or a

exchange, lease, rental, or other

Regulations section 1.993-2(j).

fiscal year.

disposition of export property by the

See Regulations section 1.993-2 for

IC-DISC.

Note. The tax year of an IC-DISC must be

more information.

4. Gross receipts from selling,

the same as the tax year of the principal

Export property. Export property must

exchanging, or otherwise disposing of

shareholder which, at the beginning of the

be:

qualified export assets that are not export

IC-DISC tax year, has the highest

property, but only if there is a recognized

percentage of voting power. If two or more

1. Made, grown, or extracted in the

gain.

shareholders have the highest percentage

United States by a person other than an

of voting power, the IC-DISC must have a

IC-DISC;

5. Dividends (or amounts includible in

tax year that conforms to the tax year of

gross income under section 951) with

2. Neither excluded under section

any such shareholder. See section 441(h).

respect to stock of

a related foreign export

993(c)(2) nor declared in short supply

corporation

(defined later).

See Pub. 538 for more information on

under section 993(c)(3);

accounting periods and tax years.

6. Interest on any obligation that is a

3. Held mainly for sale, lease, or rent

qualified export asset.

in the ordinary course of a trade or

Rounding Off to Whole

business, by or to an IC-DISC for direct

7. Gross receipts for engineering or

Dollars

use, consumption, or disposition outside

architectural services for construction

the United States;

projects outside the United States.

The IC-DISC may round off cents to whole

4. Property not more than 50% of the

dollars on its return and schedules. If the

8. Gross receipts for the performance

FMV of which is attributable to articles

IC-DISC does round to whole dollars, it

of managerial services in furtherance of

imported into the United States; and

must round all amounts. To round, drop

the production of other qualified export

amounts under 50 cents and increase

receipts of an IC-DISC.

5. Neither sold nor leased by or to

amounts from 50 to 99 cents to the next

another IC-DISC that, immediately before

For more information, see Regulations

dollar (for example, $1.39 becomes $1

or after the transaction, either belongs to

section 1.993-1.

and $2.50 becomes $3).

the same controlled group (defined in

Qualified export assets. Qualified

section 993(a)(3)) as your IC-DISC or is

If two or more amounts must be added

export assets are any of the following.

related to your IC-DISC in a way that

to figure the amount to enter on a line,

would result in losses being denied under

include cents when adding the amounts

Export property

(defined later).

section 267.

and round off only the total.

2. Assets used primarily in connection

with the sale, lease, rental, storage,

See Regulations section 1.993-3 for

Recordkeeping

handling, transportation, packaging,

details.

Keep the IC-DISC's records for as long as

assembly, or servicing of export property,

they may be needed for the administration

or the performance of engineering or

Instructions for Form 1120-IC-DISC (Rev. 9-2017)

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Instructions For Form 1120-Ic-Disc - Interest Charge Domestic International Sales Corporation Return - 2017 Page 3

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