The top 10 questions about tax incentive for exporting from the United States

The IC-DISC a hidden gem in the tax code.

U.S. taxpayers that sell, lease or license “export property” which is manufactured, produced or grown in the United States (more than 50% of the DISC materials sold must be made in America), can take advantage of strong support for their export profits in the Internal Revenue Code.

Below are the top questions asked about the IC DISC a major tax saving tool.

QUESTION 1:

Will a customer of a company that is exporting through a DISC know that there is a DISC involved in the transaction?

a) Yes.  It must be disclosed

b) No

c) Only if the exporting company is from certain states in the United  States that require it to be reported

QUESTION 2:

“Export Property” that will qualify for DISC treatment means Property:

a) Goods manufactured, produced, grown or extracted in the United   States; held for sale, lease or rental, in the ordinary course of business, for use, consumption or disposition outside the United States; and not more than 10% of the fair market value of which is  attributed to articles imported into the United States.

b) Goods manufactured, produced, grown or extracted in the United States; held for sale, lease or rental, in the ordinary course of business, for use, consumption or disposition outside the United States; and not more than 25% of the fair market value of which is attributed to articles imported into the United States.

c) Goods manufactured, produced, grown or extracted in the United States; held for sale, lease or rental, in the ordinary course of business, for use, consumption or disposition outside the United States; and not more than 50% of the fair market value of which is attributed to articles imported into the United States.

QUESTION 3:

May a DISC be established in every U.S. State or the District of Columbia?

a) Yes
b) No
c) Only in states that establish laws approving of a DISC

QUESTION 4: 

Can a DISC be formed as a . . .

a) U.S. corporation
b) U.S. trust
c) U.S. limited liability company taxed as a partnership

QUESTION 5:

A DISC can have only . . .

a) one class of stock and minimum capital of $2,500
b) common stock and preferred stock
c) only preferred stock

QUESTION 6:

A DISC must . . .

a) maintain separate books and records
b) maintain DISC books and records combined with the Export Company it is selling goods for
c) only the export company for which a DISC it is selling goods maintains all DISC books and records

QUESTION 7:

What minimum percentage of Qualified Export Receipts must result from the DISC’s export activities?

a) 95%
b) 50%
c) 25%

QUESTION 8:

What percent of the IC-DISC assets must be considered to be Qualified Export assets?

a) 95%
b) 50%
c) 25%

QUESTION 9:

What are the two major tax benefits to be gained by using a DISC?

a) The IC-DISC shareholders may leave the IC-DISC profits in the IC-DISC and defer taxation until actual distribution of the profits
b) IC-DISC distributions are considered “qualified dividends” that are subject to a maximum tax of 20%
c) DISC profits are subject to a 5% U.S. tax by the DISC

QUESTION 10:

A DISC, in pricing its goods may use . . .

a) only the Gross Receipts Methods of DISC accounting
b) only the Taxable Income Method of accounting
c) only the Arm’s Length Method of accounting
d)  any one of the above

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