FSC Tax Management Services

Critical Path Decision

On March 2, 1998, the Internal Revenue Service released the most dramatic and far-reaching Foreign Sales Corporation (FSC) Regulations in over a decade. As you are probably aware, these regulations (which are effective for the FSC's first taxable year beginning after December 31, 1997), require each FSC to elect its transaction grouping method on its initially filed return. This means that the decision to calculate the FSC benefit using a transaction-by-transaction approach or a higher level approach must be made on the first Form 1120 FSC; the decision cannot be changed on an amended Form 1120 FSC.

Additionally, all amended FSC tax returns for years beginning prior to January 1, 1998 that involve changing to transaction-by-transaction or changing grouping strategies must be completed by no later than the extended due date for filing the 1998 FSC return.