BIR Ruling

January 31, 1974 Guzman, Bocaling & Co. Certified Public Accountants 416 Regina Building Manila Gentlemen : This refers to your letter dated November 14, 1973 requesting information as to whether or not your client, a dealer in securities, is liable to pay income tax on which it has already paid the stock transfer tax and whether it may deduct from its income and loss sustained from such sales, in the following factual situation: "1. Our client is authorized under its article of incorporation to engaged in business as a stock broker and as a dealer in securities, among others, for which it pays the corresponding annual fixed taxes pursuant to Section 182 of the Tax Code. "2. It also pays the corresponding percentage taxes of 3% as a dealer in securities and other percentage taxes corresponding to its other operations authorized under its charter. "3. Being a dealer in securities, it regularly buys stocks of various companies and sells them for its own account, and for sales of those acquired after November 4, 1970 (effectivity of RA 6141), it pays for the stock transaction tax. "4. It does not deduct the stock transaction tax in its annual income tax returns." In reply thereto, I have the honor to inform you as follows: The gains realized by your client as dealer in securities from sales of stocks are considered ordinary gains, the stocks sold being stocks in trade. Accordingly, said gains should be declared for income tax purposes, less the loss sustained thereon. Since your client as dealer in securities, is subject to the percentage tax under Section 195-A of the Tax Code, the gross selling price of the shares of stock sold by the corporation as dealer in securities is not subject to the stock transaction tax imposed by Section 195-B of the same Code. (See BIR Ruling No. 73-030 dated November 14, 1973). aisa dc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."