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Obillos V CIR
Obillos V CIR
CIR
G.R. NO. L-68118, OCTOBER 29, 1985
Facts:
• The children of Jose Obillos Sr. are co-owners of parcel of lots.
• Then sold the lots to Walled City Securities Corporation and Olga Canada.
• The children treated the profit as a capital gain to which they paid an income
tax.
• The Commissioner claimed that the children formed an unregistered
partnership or joint venture since they contributed a sum of money to buy
the lots which they resold and divided the profits among themselves.
• The children rebut that they were simply co-owners and to consider them
partners would obliterate the distinction between co-ownership and
partnership
• Thier purpose was to divide the lots for residential purposes, because its not
feasible to construct and resell it
Issue:
Whether the petitioners formed unregistered partnership
Held:
No. The children of Obillos Sr. were simply co-owners where the division of the
profits from the sale of the lots was incidental to the dissolution of the co-ownership.
Under Article 1769(3) of the Civil Code provides that “the sharing of gross returns
does not of itself establish a partnership, whether or not the persons sharing them
have a joint or common right or interest in any property from which the returns are
derived”.
Co-Ownership, with properties that produce income should not automatically
be considered partners of an unregistered partnership within the purview of the
income tax law. To hold otherwise, would be to subject the income of all co-
ownerships of inherited properties to the tax on corporations, inasmuch as if a
property does not produce an income at all, it is not subject to any kind of income
tax, whether the income tax on individuals or the income tax on corporation.