Deductible Business Expenses — Remittance to SSS

February 8, 1980 BIR RULING NO. 022-80 Hon. Gilberto Teodoro Administrator Social Security System SSS Building, East Avenue Diliman, Quezon City S i r : This refers to your letter dated November 26, 1979 requesting a ruling that the portion of the contributions that self-employed persons will remit to the SSS pertaining to the employer's share in SSS and medicare contributions be considered as a deductible business expenses for income tax purposes. In reply, I have the honor to inform you that under Section 30(a)(1) of the Tax code of 1977, as amended, all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business shall be allowed as deduction from gross income in computing net income. The term "trade" or "business" is not limited to the carrying on of ordinary industrial or commercial activities, but includes the professions. (Mertens, Law of Federal Income Taxation, Vol. 4A, p. 33) An individual who is engaged in earning his livelihood as a professional man is engaged in carrying on a trade or business and is therefore entitled to deduct all the ordinary and necessary expenses incurred in connection with the carrying of that profession. The term "Professional man" includes doctor, lawyer, accountant, engineer, architect, nurse, clergyman, teacher, lecturer, scientist, author, composer, actor, singer, entertainer, athlete and military officer (See Roberto C. Coffey, 21 B.T.A. 1242; Rey Upham, 16 B.T.A. 950, J. Bantley Squier, 13 B.T.A 1223 cited in Mertens Vol. 4A, Chap. 25, p. 497). Every person who works for compensation is engaged in the business of earning his pay and expenses which are essential to the continuance of his employment are deductible. (Peoples' Pittsburg Trust Co., 21 B.T.A., 588; 60 F (2d) 187 (CCA 3rd, 1932). aisadc In the case of Flint v. Stone Tracy Co., 220 U.S. 107, the U.S. Supreme Court held that if an expense is incurred solely in the interest of business or trade it will usually be considered ordinary and necessary. The expenses should be deductible if they are "directly connected with" or proximately resulted from the practice of a profession. (Kornhauser v. United States, 276 U.S. 145, 155, 48 S. Ct. 219, 220, 72 L. Ed. 505). And if it were usual for these professionals to incur said expenses they are "ordinary". (Deputy v. Du Pont, 308 U.S. 488, 495, 60 S. Ct. 363, 84 L. Ed. 416) They were also "necessary if appropriate and helpful." (Welch v. Helvering, 290, 290 U.S. 111, 54 S. Ct. 8, 78 L. Ed 212) In view of the foregoing, it is our opinion that the portion of the contributions allotable to the employer as his counterpart share, which a self-employed individual would be remitting for compulsory coverage under Presidential Decree 1636 are deductible business expenses under Section 30(a)(1) of the Tax Code of 1977, as amended. Very truly yours, RUBEN B. ANCHETA Acting Commissioner