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    Pascual vs. Dragon

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    Russell John Hipolito
    Mariano Pascual and Renato Dragon bought and sold land in separate transactions in 1965-1970, realizing profits. The Bureau of Internal Revenue argued they formed an unregistered partnership subject to corporate taxes, but the Supreme Court disagreed. For a partnership to exist under law, there must be clear intent to form one, a distinct legal personality, and freedom to transfer property. However, the court found the two men were merely co-owners who shared profits as individuals. Even if a partnership could be assumed, the men had already paid capital gains taxes under tax amnesty as individuals, so they had no further tax liability.

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    Pascual vs. Dragon

    Uploaded by

    Russell John Hipolito
    49 views2 pages
    Mariano Pascual and Renato Dragon bought and sold land in separate transactions in 1965-1970, realizing profits. The Bureau of Internal Revenue argued they formed an unregistered partnership subject to corporate taxes, but the Supreme Court disagreed. For a partnership to exist under law, there must be clear intent to form one, a distinct legal personality, and freedom to transfer property. However, the court found the two men were merely co-owners who shared profits as individuals. Even if a partnership could be assumed, the men had already paid capital gains taxes under tax amnesty as individuals, so they had no further tax liability.

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    Mariano Pascual and Renato Dragon bought and sold land in separate transactions in 1965-1970, realizing profits. The Bureau of Internal Revenue argued they formed an unregistered partnership subject to corporate taxes, but the Supreme Court disagreed. For a partnership to exist under law, there must be clear intent to form one, a distinct legal personality, and freedom to transfer property. However, the court found the two men were merely co-owners who shared profits as individuals. Even if a partnership could be assumed, the men had already paid capital gains taxes under tax amnesty as individuals, so they had no further tax liability.

    Copyright:

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

    Pascual vs. Dragon

    Uploaded by

    Russell John Hipolito
    Mariano Pascual and Renato Dragon bought and sold land in separate transactions in 1965-1970, realizing profits. The Bureau of Internal Revenue argued they formed an unregistered partnership subject to corporate taxes, but the Supreme Court disagreed. For a partnership to exist under law, there must be clear intent to form one, a distinct legal personality, and freedom to transfer property. However, the court found the two men were merely co-owners who shared profits as individuals. Even if a partnership could be assumed, the men had already paid capital gains taxes under tax amnesty as individuals, so they had no further tax liability.

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    MARIANO P. PASCUAL and RENATO P. DRAGON vs.

    THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS

    G.R. No. 78133 October 18, 1988

    GANCAYCO, J.:

    FACTS:

    On June 22, 1965, Mariano P. Pascual and Renato P. Dragon bought two (2) parcels of
    land from Santiago Bernardino, et al. Later on May 28, 1966, they bought another three (3)
    parcels of land from Juan Roque. The first two parcels of land were sold by petitioners in 1968 to
    Marenir Development Corporation, while the three parcels of land were sold by petitioners to
    Erlinda Reyes and Maria Samson on March 19,1970. Petitioners realized a net profit in the sale
    made in 1968 in the amount of P165,224.70, while they realized a net profit of P60,000.00 in the
    sale made in 1970. The corresponding capital gains taxes were paid by petitioners in 1973 and
    1974 by availing of the tax amnesties granted in the said years.

    Then acting BIR commissioner Efren Plana wrote the petitioners asking the to pay taxes
    as prescribed in Section 24 of the NIRC. Plana stated that the petitioners formed an unregistered
    partnership or joint venture as a corporation.

    The petitioners filed a petition for review with the CTA, who later affirmed the action of
    the BIR commissioner.

    ISSUE:

    Did Pascual and Dragon form an unregistered partnership and liable to be taxed as a
    corporation? (No)

    RULING:

    The sharing of returns does not in itself establish a partnership whether or not the
    persons sharing therein have a joint or common right or interest in the property. There must be
    a clear intent to form a partnership, the existence of a juridical personality different from the
    individual partners, and the freedom of each party to transfer or assign the whole property.

    In the present case, there is clear evidence of co-ownership between the petitioners. There is no
    adequate basis to support the proposition that they thereby formed an unregistered
    partnership. The two isolated transactions whereby they purchased properties and sold the
    same a few years thereafter did not thereby make them partners. They shared in the gross
    profits as co-owners and paid their capital gains taxes on their net profits and availed of the tax
    amnesty thereby. Under the circumstances, they cannot be considered to have formed an
    unregistered partnership which is thereby liable for corporate income tax, as the respondent
    commissioner proposes.
    And even assuming for the sake of argument that such unregistered partnership appears to
    have been formed, since there is no such existing unregistered partnership with a distinct
    personality nor with assets that can be held liable for said deficiency corporate income tax, then
    petitioners can be held individually liable as partners for this unpaid obligation of the
    partnership. However, as petitioners have availed of the benefits of tax amnesty as individual
    taxpayers in these transactions, they are thereby relieved of any further tax liability arising
    therefrom.

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