CM Hoskins vs CIR
2
C.M. HOSKINS v. CIR G.R. No. L-28383. June 22, 1976.] FACTS: Petitioner-appellant, a domestic corporation engaged in the real estate business , managing agents and administrators, filed its income tax return for year 1957. Petitioner engaged in development and management of subdivisions, sale of subdivision lots and collection of installments due for a fee which the real estate owners pay as compensation for each of the services rendered, failed to pay the real estate broker's tax on its income derived from the supervision and collection fees. Consequently, the Commissioner of Internal Revenue demanded the payment of the percentage tax plus surcharge, contending that said income is subject to the real estate broker's percentage tax. On the other hand, petitioner-appellant claimed that the supervision and collection fees do not form part of its taxable gross compensation. Petitioner questions in this appeal the Tax Court's findings that the disallowed payment to Hoskins was an inordinately large one, which bore a close relationship to the recipient's dominant stockholdings and therefore amounted in law to a distribution of its earnings and profits. ISSUE: WON the supervision and collection fees received by a real estate broker are deductible from its gross compensation HELD: No. With respect to the collection fees, the services rendered by Hoskins in collecting the amounts due on the sales of lots on the installment plan are incidental to its brokerage service in selling the lots. If the broker's commissions on the cash sales of lots are subject to the brokerage percentage tax, its commissions on installment sales should likewise be taxable. As to the supervision fees for the development and management of the subdivisions, which fees were paid out of the proceeds of the sales of the subdivision lots, they, too, are subject to the real estate broker's percentage tax. The development, management and supervision services were necessary to bring about the sales of the lots and were inseparably linked thereto. Hence, there is basis for holding that the operation of subdivisions is really incidental to the main business of the broker, which is the sale of the lots on commission.
-
Upload
shain-castillo -
Category
Documents
-
view
242 -
download
1
description
TAX INCOME
Transcript of CM Hoskins vs CIR
C.M. HOSKINS v. CIR G.R. No. L-28383. June 22, 1976.]
FACTS:
Petitioner-appellant, a domestic corporation engaged in the real estate business , managing agents and administrators, filed its income tax return for year 1957. Petitioner engaged in development and management of subdivisions, sale of subdivision lots and collection of installments due for a fee which the real estate owners pay as compensation for each of the services rendered, failed to pay the real estate broker's tax on its income derived from the supervision and collection fees. Consequently, the Commissioner of Internal Revenue demanded the payment of the percentage tax plus surcharge, contending that said income is subject to the real estate broker's percentage tax. On the other hand, petitioner-appellant claimed that the supervision and collection fees do not form part of its taxable gross compensation. Petitioner questions in this appeal the Tax Court's findings that the disallowed payment to Hoskins was an inordinately large one, which bore a close relationship to the recipient's dominant stockholdings and therefore amounted in law to a distribution of its earnings and profits.
ISSUE: WON the supervision and collection fees received by a real estate broker are deductible from its gross compensation
HELD: No. With respect to the collection fees, the services rendered by Hoskins in collecting the amounts due on the sales of lots on the installment plan are incidental to its brokerage service in selling the lots. If the broker's commissions on the cash sales of lots are subject to the brokerage percentage tax, its commissions on installment sales should likewise be taxable. As to the supervision fees for the development and management of the subdivisions, which fees were paid out of the proceeds of the sales of the subdivision lots, they, too, are subject to thereal estate broker's percentage tax. The development, management and supervision services were necessary to bring about the sales of the lots and were inseparably linked thereto. Hence, there is basis for holding that the operation of subdivisions is really incidental to the main business of the broker, which is the sale of the lots on commission.
