Business Expense Deduction of a President of a Corporation

January 29, 1958 BIR RULING NO. 072-58 Mr. Johnny Cheng 224 Quirino Avenue Paraaque, Rizal S i r : Reference is made to your letter dated January 6, 1958, stating that a certain person who is president of five various corporations, intends to establish his own office and employ personnel like secretaries, accountants, legal assistants, office boys and messenger. LexLib You now request information from this Office as to whether the salaries paid by the abovementioned president to his personnel are deductible from his personal income received from the five corporations. In reply thereto, I have the honor to inform you that, as a matter of policy, this Office refrains from issuing rulings on hypothetical questions. However, please be informed that as president of five corporations, the abovementioned person is deemed engaged in "carrying on a trade of business" as that term is used in Section 30(a)(1) of the Tax Code. (Sec. 84(r), Tax Code; Ralph C. Holmes vs. Comm. of Internal Revenue, 37 BTA 865) In this connection, please be further informed that expenses paid or incurred by a taxpayer in carrying on his trade or business, including a reasonable allowance for salaries or compensation for services actually rendered, are deductible from his gross income provided that such expenses are shown to be ordinary and necessary in the conduct of his trade or business. (Sec. 30(a)(1), Tax Code) As regards the expenses paid or incurred by the abovementioned person in connection with the operation of his real estate business and other business conducted by him, the same may be claimed as a business expense deduction under the general expense provision of Section 30(a)(1) of the Tax Code. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue