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The Tax Court in Bentley Laboratories.Inc. prevented the DISC's supplier from deferring its share of the export income until the following fiscal year. However, the rationale used by the Tax Court may enable some DISC suppliers to obtain this additional tax deferral. This article examines the issues affecting the supplier's deferral, the facts and holding in Bentley. and possible situations that may permit the supplier to obtain a tax deferral for its portion of the export income.
Background
The
DISC statute and regulations do not deal specifically with the
timing of the income recognition by the DII) C’s supplier
from the export transactions. Detailed rules determine when the
DISC earns its portion of the income,2 and other rules affect
the time when the DISC's shareholder (which mayor may not be the
DISC's supplier) recognizes income from deemed and actual distributions
by the DISC,3 but these rules do not affect the time at which
the supplier recognizes its own portion of the income from the
export transactions.
ROBERT FEINSCHREIBER is an attorney in the law firm of ExportDISC Management Company. He received his B.A. from Trinity College, LL.B. from Yale Law School, M.B.A. from Columbia Graduate School of Business, and LL.M. in Taxation from New York University.
