See sections 246(d), 904(f), 995, and 996 for rules regarding the treatment of a deficiency distribution to meet qualification requirements by the shareholders and the corporation.
Example.
Y's commission (gross income) from the transaction | $15,000 |
Less: Y's expenses apportioned or allocated to its gross income from the transaction | 9,000 |
Required deficiency distribution by reason of $100,000 of gross receipts which are not qualified export receipts | 6,000 |
Y's commissions (gross income) from the transaction | $9,400 |
Less: Y's expenses apportioned or allocated to its gross income from the transaction | 9,000 |
Required deficiency distribution by reason of $100,000 of gross receipts which are not qualified export receipts | 400 |
Example. X corporation, which uses the calendar year as its taxable year, meets the 95 percent assets test but fails to meet the 95 percent of gross receipts test for 1972 and does not by September 15, 1973, make the deficiency distribution required by reason of its failure to meet such test. Assume that reasonable cause exists for the corporation's failure to meet the 95 percent of gross receipts test and failure to make the required deficiency distribution. If X makes the required deficiency distribution, in the amount of $10,000, on April 1, 1976, X must pay on or before April 30, 1976, to the service center with which it files its annual information return a charge of $1,800, computed as follows:
Deficiency distribution made by X | $10,000 |
Multiplied by 41/2 percent | .045 |
Intermediate product | 450 |
Multiplied by: Number of X's taxable years beginning after 1972 and before April 1, 1976 | 4 |
Charge to be paid service center because of late deficiency distribution (which is considered interest) | 1,800 |
26 C.F.R. §1.992-3