EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA

,petitioners,

vs.

THE COLLECTOR OF INTERNAL REVENUE and THE COURT OFTAX APPEALS,

respondents.
G.R. No. L-9996, October 15, 1957
Facts:
Petitioners borrowed sum of money from their father and together with their own personal funds
theyused said money to buy several real properties. They then appointed their brother (Simeon) as
manager of thesaid real properties with powers and authority to sell, lease or rent out said
properties to third persons. Theyrealized rental income from the said properties for the period 19451949.On September 24, 1954 respondent Collector of Internal Revenue demanded the payment of
income tax oncorporations, real estate dealer's fixed tax and corporation residence tax for the years
1945-1949. The letter of demand and corresponding assessments were delivered to petitioners on
December 3, 1954, whereupon theyinstituted the present case in the Court of Tax Appeals, with a
prayer that "the decision of the respondent contained in his letter of demand dated September 24,
1954" be reversed, and that they be absolved from thepayment of the taxes in question. CTA denied
their petition and subsequent MR and New Trials were denied.Hence this petition.
Issue:
Whether or not petitioners have formed a partnership and consequently, are subject to the tax
oncorporations provided for in section 24 of Commonwealth Act. No. 466, otherwise known as the
NationalInternal Revenue Code, as well as to the residence tax for corporations and the real estate
dealers fixed tax.
Held: YES.
The essential elements of a partnership are two, namely: (a)
an agreement to contribute money,property or industry to a common fund
; and (b)
intent to divide the profits among the contractingparties
. The first element is undoubtedly present in the case at bar, for, admittedly, petitioners have agreed
to,and did, contribute money and property to a common fund. Upon consideration of all the facts
andcircumstances surrounding the case, we are fully satisfied that their purpose was to engage in
real estatetransactions for monetary gain and then divide the same among themselves, because of
the followingobservations, among others: (1) Said common fund was not something they found
already in existence; (2)They invested the same, not merely in one transaction, but in a series of
transactions; (3) The aforesaid lotswere not devoted to residential purposes, or to other
personal uses, of petitioners herein.Although, taken singly, they might not suffice to establish the
intent necessary to constitute a partnership, thecollective effect of these circumstances is such as to
leave no room for doubt on the existence of said intent inpetitioners herein.For purposes of the tax
on corporations, our National Internal Revenue Code, includes these partnerships

with the exception only of duly registered general copartnerships

within the purview of the term"corporation." It is, therefore, clear to our mind that petitioners
herein constitute a partnership, insofar as saidCode is concerned and are subject to the income tax
for corporations

Case Digest: Reyes vs. CIR (24 SCRA 198)

Under: Tax Updates
Thursday, Jan. 06 2011
FACTS: 1. Petitioners Florencio and Angel Reyes, father and son, purchased a lot and building for P
835,000.00. 2. The amount of P 375,000.00 was paid. 3. The balance of P 460,000.00 was left,
which represents the mortgage obligation of the vendors with the China Banking Corporation,
which mortgage obligations were assumed by the vendees. 4. The initial payment of P 375,000.00
was shared equally by the petitioners. 5. At the time of the purchase, the building was leased to
various tenants, whose rights under the lease contracts with the original owners, the purchaser,
petitioners herein, agreed to respect. 6. Petitioners divided equally the income of operation and
maintenance. 7. The gross income from rentals of the building amounted to about P 90,000.00
annually. 8. An assessment was made against petitioners by the CIR. 9. The assessment sought to be
reconsidered was futile. 10. On appeal to the Court of Tax Appeals, the CTA ruled that petitioners
are liable for the income tax due from the partnership formed by petitioners. ISSUE: Are
petitioners subject to the tax on corporations provided for in the National Internal Revenue Code?
HELD: After referring to another section of the NIRC, which explicitly provides that the term
corporations includes partnerships and then to Article 1767 of the Civil Code of the
Philippines, defining what a contract of partnership is, the opinion goes on to state that the
essential elements of a partnership are two, namely: a) an agreement to contribute money, property
or industry to a common fund; and b) intent to divide the profits among the contracting parties. The
first element is undoubtedly present in the case, for, admittedly, petitioners have agreed to , and
did, contribute money and property to a common fund. Hence, the issue narrows down to their
intent in acting as they did. Upon consideration of all the facts and circumstances surrounding the
case, it was determined that their purpose was to engage in real estate transaction for monetary gain
and then divide the same among themselves, hence taxable.

PASCUALv.CommissionerofInternal
Revenue#10BUSORG

G.R.No.78133October18,1988

GANCAYCO,J.:

FACTS:

OnJune22,1965,petitionersboughttwo(2)
parcelsoflandfromSantiagoBernardino,etal.
andonMay28,1966,theyboughtanother
three(3)parcelsoflandfromJuanRoque.The
firsttwoparcelsoflandweresoldbypetitioners
in1968toMarenirDevelopmentCorporation,
whilethethreeparcelsoflandweresoldby
petitionerstoErlindaReyesandMariaSamson
onMarch19,1970.Petitionerrealizedanet
profitinthesalemadein1968intheamountof
P165,224.70,whiletheyrealizedanetprofitof
P60,000inthesalemadein1970.The
correspondingcapitalgainstaxeswerepaidby
petitionersin1973and1974.
RespondentCommissionerinformedpetitioners
thatintheyears1968and1970,petitionersas
coownersintherealestatetransactionsformed
anunregisteredpartnershiporjointventure
taxableasacorporationunderSection20(b)
anditsincomewassubjecttothetaxes

prescribedunderSection24,bothofthe
NationalInternalRevenueCode;thatthe
unregisteredpartnershipwassubjectto
corporateincometaxasdistinguishedfrom
profitsderivedfromthepartnershipbythem
whichissubjecttoindividualincometax.
ISSUE:
Whetherpetitionersformedanunregistered
partnershipsubjecttocorporateincometax
(partnershipvs.coownership)
RULING:

Article1769ofthenewCivilCodelaysdownthe
rulefordeterminingwhenatransactionshould
bedeemedapartnershiporacoownership.
Saidarticleparagraphs2and3,provides:(2)Co
ownershiporcopossessiondoesnotitself
establishapartnership,whethersuchcoowners
orcopossessorsdoordonotshareanyprofits
madebytheuseoftheproperty;(3)The
sharingofgrossreturnsdoesnotofitself
establishapartnership,whetherornotthe
personssharingthemhaveajointorcommon
rightorinterestinanypropertyfromwhichthe
returnsarederived;
Thesharingofreturnsdoesnotinitself
establishapartnershipwhetherornotthe
personssharingthereinhaveajointorcommon
rightorinterestintheproperty.Theremustbe
aclearintenttoformapartnership,the
existenceofajuridicalpersonalitydifferentfrom
theindividualpartners,andthefreedomofeach
partytotransferorassignthewholeproperty.
Inthepresentcase,thereisclearevidenceof
coownershipbetweenthepetitioners.Thereis
noadequatebasistosupporttheproposition
thattheytherebyformedanunregistered
partnership.Thetwoisolatedtransactions
wherebytheypurchasedpropertiesandsoldthe
sameafewyearsthereafterdidnotthereby
makethempartners.Theysharedinthegross
profitsascoownersandpaidtheircapitalgains
taxesontheirnetprofitsandavailedofthetax
amnestythereby.Underthecircumstances,they
cannotbeconsideredtohaveformedan
unregisteredpartnershipwhichistherebyliable
forcorporateincometax,astherespondent
commissionerproposes.
Andevenassumingforthesakeofargument
thatsuchunregisteredpartnershipappearsto
havebeenformed,sincethereisnosuch
existingunregisteredpartnershipwithadistinct
personalitynorwithassetsthatcanbeheld
liableforsaiddeficiencycorporateincometax,
thenpetitionerscanbeheldindividuallyliableas
partnersforthisunpaidobligationofthe
partnership