Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 73-81

1973-1 C.B. 357

Sec. 441
Sec. 992

IRS Headnote

An election to be treated as a DISC is not affected by the adoption of a different initial taxable year from that specified on Form 4876 (Election to be Treated as a DISC).

Full Text

Rev. Rul. 73-81

Advice has been requested concerning the adoption of a taxable year by a Domestic International Sales Corporation ("DISC") under the circumstances described below.

X, a domestic corporation organized on April 20, 1972, filed an election on May 2, 1972, to be treated as a DISC. The election was made on Form 4876 (Election to be Treated as a DISC) pursuant to section 992(b)(1) of the Internal Revenue Code of 1954.

In preparing Form 4876, the taxpayer indicated that it would use a calendar year ending December 31, for filing its annual returns.

On June 15, 1972, the management of X decided that they would prefer to file their annual returns on the basis of a fiscal year ending March 31.

The questions are (1) whether X is bound by the election made on Form 4876 to adopt December 31 as the taxable year for filing its annual returns or may X adopt a taxable year other than a taxable year ending December 31, and (2) whether the election to be treated as a DISC by X would be affected by the adoption of a taxable year different from that specified on the Form 4876.

Section 992(b)(1) of the Code provides that an election by a corporation to be treated as a DISC 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 or his delegate may give his consent to the making of an election at such other times as he may designate. See also Rev. Proc. 72-12, 1972-1 C.B. 733.

Section 1.441-1(b)(3) of the Income Tax Regulations provides, in pertinent part, that a new taxpayer in his first return may adopt any taxable year which meets the requirements of section 441 of the Code and this section without obtaining prior approval. The first taxable year of a new taxpayer must be adopted on or before the time prescribed by law (not including extensions) for the filing of the return for such taxable year.

The adoption of a taxable year by a new corporation is accomplished by the filing of a timely return for the period covered by such return or by some action which is considered equivalent to the filing of such return. In the instant case, the election by X to be treated as a DISC under section 992(b) of the Code, is not affected by the adoption of an initial taxable year different from that specified on Form 4876.

Accordingly, it is held that X is not bound to adopt in its first Federal income tax return a taxable year ending December 31 but is free to adopt any taxable year that is consistent with the principles of section 441 of the Code and the regulations thereunder. It is further held that the adoption by X of a taxable year other than a taxable year ending December 31 will not invalidate its election to be treated as a DISC.