Taking advantage of IC-DISC opportunities

Th e ima g e c an n o t b e d isp lay e d . Yo u r c o mp u te r ma y n o t h av e e n o u g h me mo r y to o p en th e imag e , o r t h e imag e may h av e b e en c o r r u p te d. Re star t y o u r c o mp u te r , an d th e n o p en th e f ile a g ain . If th e r e d x still ap p e ar s, y o u ma y h a v e to d e let e th e ima g e a n d t h en in ser t it ag a in .

Randy Free Jim Loizeaux

Michael Reeves

IC-DISC IC-DISC

Shareholder Owned (C or S corporation)

S-Corporation Owned

Shareholder Shareholder

Dividend Commission Payment IC-DISC U.S. Export Corporation IC-DISC Services Service s Dividend Export Sales

Commission Payment

U.S. Export Corporation

Service s Services

Export Sales

Customer

Customer

IC-DISC commission (greater of): 50% of export net income 4% of export gross receipts 250,000 400,000

IC-DISC Dividend Federal tax cost (15%) IC-DISC net tax savings

400,000 (60,000)

80,000
5

Background and overview Benefit computation Advanced topics Questions and answers

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Background and overview Benefit computation Advanced topics Questions and answers

Example

less than

Gross Receipts Method CTI Method IC-DISC Income

400,000 375,000 400,000

Example

greater than Gross Receipts Method CTI Method IC-DISC Income 400,000 500,000 500,000

Example Base Case Product A Product B

Gross Receipts Method CTI Method

400,000 500,000 500,000

200,000 125,000 200,000

200,000 375,000 375,000

IC-DISC Income

Example Total Sales Export Domestic

MC Profit Margi in OPP 20%

30%

MC CTI (Limited to OPP) 500,000

IC-DISC Income

Background and overview Benefit computation Advanced topics Questions and answers

Background and overview Benefit computation Advanced topics Questions and answers

Randy Free, T T E E

Jim Loizeaux,

Michael Reeves,

Tax Professional Standards Statement