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G.R. No.

L-26284 October 8, 1986


TOMAS CALASANZ, ET AL., petitioners,
vs.
THE COMMISSIONER OF INTERNAL REEN!E "#$ t%e CO!RT OF TA&
A''EALS, respondents.
FACTS(
Petitioner Ursula Calasanz inherited from her father Mariano de Torres an agricultural land
located in Cainta, Rizal, containing a total area of 1,67,!!! s"uare meters. #mprovements $ere
introduced to ma%e the lots salea&le. 'oon after, the lots $ere sold to the pu&lic at a profit.
#n their (oint income ta) return for the *ear 1+,7 petitioners disclosed a profit of P-1,!6!.!6
realized from the sale of the su&divided lots, and reported fift* per centum thereof or P1,,,-!.!-
as ta)a&le capital gains.
.n 'eptem&er /+, 1+6/, petitioners received from respondent Commissioner of #nternal
Revenue0
a. 1emand 2o. +!343!-//+-3,7 in the amount of P16!.!! representing real
estate dealer5s fi)ed ta) of P1,!.!! and P1!.!! compromise penalt* for late
pa*ment6 and
&. 7ssessment 2o. +!3,3-,6++ in the amount of P-,,61./8 as deficienc* income
ta) on ordinar* gain of P-,!1.!! plus interest of P ,8-./8.
The Revenue 9)aminer ad(udged petitioners engaged in &usiness as real estate dealers thus
the* $ere re"uired to pa* the real estate dealer5s ta) and assessed a deficienc* income ta) on
profits derived from the sale of the lots &ased on the rates for ordinar* income.
.n .cto&er 17, 1+6/, petitioners filed $ith the Court of Ta) 7ppeals a petition for revie$
contesting the assessments.
.n :une 7, 1+66, the Ta) Court upheld the respondent Commissioner e)cept for that portion of
the assessment regarding the compromise penalt*.
The* elevated the case to the 'upreme Court.
ISS!E(
;hether or not the gains realized from the sale of the lots are ta)a&le in full as ordinar* income
or capital gains ta)a&le at capital gain rates.
HEL)(
The decision of the Court of Ta) 7ppeals $as affirmed.
Upon an e)amination of the facts on record, the Court $as convinced that the activities of
petitioners are indistinguisha&le from those invaria&l* emplo*ed &* one engaged in the &usiness
of selling real estate. Petitioners $ere deemed to &e in the real estate &usiness for having &een
involved in a series of real estate transactions pursued for profit, that the ultimate purpose is to
li"uidate is of no moment for the important in"uir* is $hat the ta)pa*er did $ith the propert*.
'ince the lots are ordinar* assets, the profits realized therefrom are ordinar* gains, hence are
ta)a&le in full.
The term 5capital assets5 means propert* held &* the ta)pa*er <$hether or not connected $ith
his trade or &usiness=, &ut does not include, stoc% in trade of the ta)pa*er or other propert* of a
%ind $hich $ould properl* &e included, in the inventor* of the ta)pa*er if on hand at the close of
the ta)a&le *ear, or propert* held &* the ta)pa*er primaril* for sale to customers in the ordinar*
course of his trade or &usiness, or propert* used in the trade or &usiness of a character $hich is
su&(ect to the allo$ance for depreciation6 or real propert* used in the trade or &usiness of the
ta)pa*er.
The Court failed to see the reasons &ehind a person5s entering into a &usiness3$hether it is to
ma%e mone* or $hether it is to li"uidate3should &e determinative of the "uestion of $hether or
not the gains resulting from the sales are ordinar* gains or capital gains. The sole "uestion is3
$ere the ta)pa*ers in the &usiness of su&dividing real estate> #f the* $ere, then it seems
indisputa&le that the propert* sold falls $ithin the e)ception in the definition of capital assets3 it
constituted 5propert* held &* the ta)pa*er primaril* for sale to customers in the ordinar* course
of his trade or &usiness.
C*t"+, F"r,c" Z-".bo
Se/te.ber 22, 2012

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