Clarification of the Term "Rent" Under Section 65 (g) of the NIRC

June 20, 1967 BIR RULING NO. 024-67 Atty. Salvador J. Lorayes Ayala Securities Corporation Ayala Avenue Makati, Rizal S i r : This refers to your letter dated June 24, 1966 requesting a ruling on whether the term "rent" as used in Section 65(g) of the National Internal Revenue Code is limited to the consideration for the use of, or right to use, real property and improvements thereon, or whether it also includes rents for the use of machinery, equipment, rolling stock and other personal property which may be held out by the owners thereof for rent to customers. In reply thereto, I have the honor to inform you that pursuant to Section 222, Revenue Regulations No. 2, amplifying Section 65(g) of the Tax Code, the rents which are to be included in personal holding company income consist of compensation, however designated including charter fees, etc., for the use of, or the right to use, real property, or any other kind of property and the interest on debts owed to the corporation, to the extent such debts represent the price for which real property held primarily for sale to customers in the ordinary course of its trade or business was sold or exchanged by the corporation, but do not include amounts constituting personal holding company income under Section 65(f) of the Tax Code, and subparagraph (9) of Section 222, Revenue Regulations No. 2. However, rents do not constitute personal holding company income if constituting 50 per cent or more of the gross income of the corporation. In view thereof, this Office believes and so holds that the word "rent" as used in Section 65(g) of the Tax Code embraces not only compensation for the use of, or right to use, real property but also the consideration for the use of machinery, equipment, rolling stock and other personal property which may be held out by their owners for rent to customers. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue