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    Ona V CIR - Tax

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    Kayee Kat
    The heirs of Julia Buñales owned undivided interests in properties following her death in 1944. In 1949, a project for partitioning the estate was approved, but the properties remained under the management of Lorenzo Oña. Oña used the properties for business, investing the income. While the heirs reported income from the properties on their tax returns, they did not actually receive distributions. The CIR determined this constituted an unregistered partnership subject to corporate income tax. The CTA affirmed, finding that by allowing Oña to manage their shares as a common fund to generate profits, an unregistered partnership was formed for tax purposes, making the heirs liable for deficiency corporate income tax for 1955-1956.

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    Ona V CIR - Tax

    Uploaded by

    Kayee Kat
    73 views2 pages
    The heirs of Julia Buñales owned undivided interests in properties following her death in 1944. In 1949, a project for partitioning the estate was approved, but the properties remained under the management of Lorenzo Oña. Oña used the properties for business, investing the income. While the heirs reported income from the properties on their tax returns, they did not actually receive distributions. The CIR determined this constituted an unregistered partnership subject to corporate income tax. The CTA affirmed, finding that by allowing Oña to manage their shares as a common fund to generate profits, an unregistered partnership was formed for tax purposes, making the heirs liable for deficiency corporate income tax for 1955-1956.

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    Case digest

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    Ona V CIR_Tax

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    The heirs of Julia Buñales owned undivided interests in properties following her death in 1944. In 1949, a project for partitioning the estate was approved, but the properties remained under the management of Lorenzo Oña. Oña used the properties for business, investing the income. While the heirs reported income from the properties on their tax returns, they did not actually receive distributions. The CIR determined this constituted an unregistered partnership subject to corporate income tax. The CTA affirmed, finding that by allowing Oña to manage their shares as a common fund to generate profits, an unregistered partnership was formed for tax purposes, making the heirs liable for deficiency corporate income tax for 1955-1956.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    73 views2 pages

    Ona V CIR - Tax

    Uploaded by

    Kayee Kat
    The heirs of Julia Buñales owned undivided interests in properties following her death in 1944. In 1949, a project for partitioning the estate was approved, but the properties remained under the management of Lorenzo Oña. Oña used the properties for business, investing the income. While the heirs reported income from the properties on their tax returns, they did not actually receive distributions. The CIR determined this constituted an unregistered partnership subject to corporate income tax. The CTA affirmed, finding that by allowing Oña to manage their shares as a common fund to generate profits, an unregistered partnership was formed for tax purposes, making the heirs liable for deficiency corporate income tax for 1955-1956.

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    of 2

    Ona V CIR, GR L-19342, 1972

    Facts:

    Julia Buñales died (March 23, 1944) leaving as heirs her surviving spouse, Lorenzo Oña and her five
    children. A civil case was instituted for the settlement of her state, in which Oña was appointed
    administrator and guardian of the three heirs who were still minors (1949) when the project for
    partition was approved. This shows that the heirs have undivided ½ interest in 10 parcels of land, 6
    houses and money from the War Damage Commission.

    Although the project of partition was approved by the Court (1949), no attempt was made to divide the
    properties and they remained under the management of Oña who used said properties in business by
    leasing or selling them and investing the income derived therefrom and the proceeds from the sales
    thereof in real properties and securities. As a result, petitioners’ properties and investments gradually
    increased from P105,450.00 in 1949 to P480,005.20.

    The incomes are recorded in the books of account kept by Lorenzo T. Oña where the corresponding
    shares of the petitioners in the net income for the year are also known. Every year, petitioners returned
    for income tax purposes their shares in the net income derived from said properties and securities
    and/or from transactions involving them. However, petitioners did not actually receive their shares in
    the yearly income. The income was always left in the hands of Lorenzo T. Oña who, as heretofore
    pointed out, invested them in real properties and securities.

    Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore,
    subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners asked for
    reconsideration, which was denied hence this petition for review from CTA’s decision.

    Issue:

    1. WON there was a co-ownership or an unregistered partnership


    2. WON the petitioners are liable for the deficiency corporate income tax
    Held:

    1. Yes. The Tax Court found that instead of actually distributing the estate of the deceased among
    themselves pursuant to the project of partition, the heirs allowed their properties to remain under the
    management of Oña and let him use their shares as part of the common fund for their ventures, even as
    they paid corresponding income taxes on their respective shares.

    2. Yes. The first thing that has struck the Court is that whereas petitioners' predecessor in interest died
    way back on March 23, 1944 and the project of partition of her estate was judicially approved as early as
    May 16, 1949, and presumably petitioners have been holding their respective shares in their inheritance
    since those dates admittedly under the administration or management of the head of the family, the
    widower and father Lorenzo T. Oña, the assessment in question refers to the later years 1955 and 1956.
    For tax purposes, the co-ownership of inherited properties is automatically converted into an
    unregistered partnership the moment the said common properties and/or the incomes derived
    therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their
    respective shares in the inheritance as determined in a project partition either duly executed in an
    extrajudicial settlement or approved by the court in the corresponding testate or intestate proceeding.
    From the moment of such partition, the heirs are entitled already to their respective definite shares of
    the estate and the incomes thereof, for each of them to manage and dispose of as exclusively his own
    without the intervention of the other heirs, and, accordingly, he becomes liable individually for all taxes
    in connection therewith. If after such partition, he allows his share to be held in common with his co-
    heirs under a single management to be used with the intent of making profit thereby in proportion to
    his share, there can be no doubt that, even if no document or instrument were executed, for the
    purpose, for tax purposes, at least, an unregistered partnership is formed.
    For purposes of the tax on corporations, our National Internal Revenue Code includes these partnerships
    with the exception only of duly registered general co-partnerships within the purview of the term
    “corporation.” It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar
    as said Code is concerned, and are subject to the income tax for corporations.
    The CTA Judgment is hereby affirmed.

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