Rev. Rul. 55-756

I.T. 3806, C.B. 1946-2, 41, has been reconsidered in the light of the decision of the United States Court of Claims in Walter Hirshon v. United States , 116 Fed.Supp. 135.

The Court held in the Hirshon case that Federal stock transfer taxes imposed on one who is carrying on the business of buying and selling stock as a trader on his own account were `ordinary and necessary business expenses' under section 23(a) of the Internal Revenue Code of 1939 and were, therefore, deductible for Federal income tax purposes. This decision is in conflict with the position of the Internal Revenue Service as expressed in I.T. 3806, supra .

I.T. 3806, supra , holds that where Federal stamp taxes are paid on transfers or conveyances of securities or real estate upon sales thereof by a trader or other non-dealer, such taxes are selling costs or offsets against selling prices to be taken into account only in determining the net amount realized and gains or losses, on the particular transaction involved, under section 111 of the Internal Revenue Code.

Where a taxpayer purchases and sells securities as a trader or other non-dealer, the Internal Revenue Service considers the Federal stock transfer taxes as selling charges or offsets against selling prices in the same manner as attorney's fees, brokers' fees, or selling commissions. Helvering v. Robert C. Winmill , 305 U.S. 79, Ct. D. 1365, C.B. 1938-2, 212; Adolph B. Spreckles v. Commissioner , 315 U.S. 626, Ct. D. 1547, C.B. 1942-1, 198. The basis for this position is that the liability for Federal stock transfer taxes is a charge specifically attributable to the transaction of the particular sale involved, whether it be an isolated transaction on the part of taxpayer or one of a series of transactions, rather than a general ordinary and necessary expense under section 23(a) of the Code.

In view of the above, the Internal Revenue Service feels constrained to adhere to the position expressed in I.T. 3806, supra , and will not follow the decision in the Hirshon case