BIR Ruling No. 122-82

April 16, 1982 BIR RULING NO. 122-82 064 000-00 122-82 Messrs. Carlos J. Valdez & Co. CJVC Building, Aguirre St. Legaspi Village, Makati Metro Manila Attention: Mr . Ernesto S . Taino, Jr . Gentlemen : This refers to your letter dated September 10, 1981, on behalf of Caval Realty Corporation, requesting confirmation of your opinion that the dividends received by a domestic corporation from another domestic corporation or resident foreign corporation shall no longer be included in the computation of the 45% personal holding company tax. In reply, I have the honor to inform you that your request is answered in the affirmative. It should be noted that the 45% personal holding company tax is based on the undistributed net income of the personal holding company. (Sec. 65, Tax Code). The tax is 45% of the amount of the undistributed net income . (Sec. 218, Revenue Regulations No. 2) Dividends comprise any distribution whether in cash or other property, in the ordinary course of business, even though extraordinary in amount, made by a corporation to its shareholders out of its earnings and profits . (Sec. 250, Revenue Regulations No. 2) Earnings and profits form part of the net income of the corporation; hence, dividends are included in the latter. Consequently, if dividends have been distributed to the shareholders, the same no longer form part of the undistributed net income of the corporation. However, in determining whether or not the gross income requirement under Section 64 of the Tax Code is met, said dividend should be taken into account, since the same is one of the items constituting personal holding company income under Section 65(a) of the same Code. Very truly yours, RUBEN B. ANCHETA Acting Commissioner