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  • Obillos V CIR

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    Susie Soto
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    The children of Jose Obillos Sr. co-owned some parcels of land. They sold the land and treated the profits as capital gains for tax purposes. The Commissioner claimed the children formed an unregistered partnership in buying and reselling the land. However, the court held that the children were simply co-owners, and the division of profits from selling the land was due to dissolving the co-ownership, not partnership. Under civil law, sharing returns alone does not establish a partnership. The court affirmed co-owners of income-producing property are not automatically considered an unregistered partnership for tax purposes.

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    case digest

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    Obillos v CIR

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    The children of Jose Obillos Sr. co-owned some parcels of land. They sold the land and treated the profits as capital gains for tax purposes. The Commissioner claimed the children formed an unregistered partnership in buying and reselling the land. However, the court held that the children were simply co-owners, and the division of profits from selling the land was due to dissolving the co-ownership, not partnership. Under civil law, sharing returns alone does not establish a partnership. The court affirmed co-owners of income-producing property are not automatically considered an unregistered partnership for tax purposes.

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    © All Rights Reserved
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    18 views1 page

    Obillos V CIR

    Uploaded by

    Susie Soto
    The children of Jose Obillos Sr. co-owned some parcels of land. They sold the land and treated the profits as capital gains for tax purposes. The Commissioner claimed the children formed an unregistered partnership in buying and reselling the land. However, the court held that the children were simply co-owners, and the division of profits from selling the land was due to dissolving the co-ownership, not partnership. Under civil law, sharing returns alone does not establish a partnership. The court affirmed co-owners of income-producing property are not automatically considered an unregistered partnership for tax purposes.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 1

    OBILLOS V.

    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.

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