CO OWNERSHIP

for income tax purposes, the co owners report their share of income from the property owned in cmmon by
them in their individual tax returns for the year, and the co ownership is not considered as a separate tax entity,
or a corporation as definded in NIRC 22 B.

In a co ownership arising from the death of the decedent, the court clearly established that such coownership is
automatically terminated upon the partition and distributiion of the properties of the estate and an unregistered
partnership is created when the heri invested common properties and income, and place them under a single
management.

However, the coownership is not converted into a partnership where the transactions of the co owners intended
to liquidate the co ownership are few or isolated, and the element of habituality is not present.

The intention of the coowners should also be considered.

Co-ownership due to death of a decedent: in general, co ownerships are not treated as separate tax entites. The
income of co ownerships are not subject to income tax, if the activities of coowners are limited to the preservation
of the property and collection of the income therefrom. In which case, each coowner is taxed individually on his
distributive share. Before the partition and and distributiion of the estate, all the income belongs commonly to all heirs

if the coowners invest the income of the coownership in any income producing properties after the Extra-judicial
partition of the estate, they would constitute themselves into a partnership which is consequently subject to
income tax as a corporation.

The coownership of inherited properties is automatically converted into an unregistered partnership the moment
the said common properties and or 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
Isolated transactions: the sharing of profits in a common property does not itself establish a partnership but is a
consequence of 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 assing or
transfer the whole property. the character of habituality for the purpose of gain must be present to consider them an
unregistered partnership.
Transfer of property from father to children: in this case when the children sold at a profit the two lots given by their
father, there was no intention of forming a partnership. The transaction was isolated and their original purpose was to
divide the lots for residential purposes but this did not materialize and so they had to sell the properties; the division of
the profit was merely incidental to the dissolution of the coownership. The sharing of gross returns does not of itself
establish a joint partnership whether or not the persons sharing them have a joint or common right or interest in the
property from which the returns are derived.
No community of interest where parties severally retain title: persons who contribute property or funds to a common
enterprise and agree