Summary Of Corporate Forms A summary of the tax characteristics of different corporate forms.

Domestic International Sales Corporation Now defunct, the DISC was used in conjunction with Foreign Sales Corporations.

Limited Partnership Limited Partnerships are often used for investment-holding purposes, and have 'pass-through' status for domestic partners.

Domestic International Sales Corporation

The Domestic International Sales Corporation is now of only historical interest. The form existed until 2002 to encourage export activity by allowing tax deferral within the DISC while it was more or less exclusively engaged in export sales activity; but when the Foreign Sales Corporation regime was replaced following adverse rulings from the WTO, the DISC ceased to be of interest.

In order to qualify as a Domestic International Sales Corporation (DISC), a corporation needed to have only one class of stock with par value of at least $2,500. An IC-DISC election must have been made and not terminated, and the parent corporation must not have an affiliated FSC (Foreign Sales Corporation).

95% of the corporation's gross receipts had to be from the sale of qualified export property, or from the the sale, lease, or servicing of export property. Qualified export property had to be produced in the United States and consumed outside the United States; less than 50 percent of the fair market value could be imported. 95% of the corporation's assets had to be 'export assets'.

There were complex rules governing the allocation of expenses, treatment of loss sales, treatment of interest expense, etc.

The profits of a DISC were not subject to corporate taxation (it was deferred), although income from a DISC was subject to corporate taxation in the hands of shareholders in certain circumstances:

• Deemed distribution
  
• Distribution upon disqualification
  
• Income attributable to military property
  
• Disposition of DISC stock
  
• There was a foreign investment attributable to IC-DISC earnings
  
• Any income attributable to qualified export receipts exceeding $10 million.

Form 8404 (Computation of Interest Charge on DISC-Related Deferred Tax Liability) had to be filed to report the interest charge on an IC-DISC. The priority of distributions was:

• Out of previously taxed income (PTI)
  
• Out of accumulated DISC income
  
• Out of other E&P

This is a highly simplified account of the DISC, whose operation was closely controlled by detailed legislation.

Summary Of Corporate Forms A summary of the tax characteristics of different corporate forms.

Domestic International Sales Corporation Now defunct, the DISC was used in conjunction with Foreign Sales Corporations.

Limited Partnership Limited Partnerships are often used for investment-holding purposes, and have 'pass-through' status for domestic partners.