(10%)
Weber Realty Company which owns a three-hectare land in Antipolo entered into a Joint Venture Agreement (JVA) with Prime Development Company for the development of said parcel of land. Weber Realty as owner of the land contributed the land to the Joint Venture and Prime Development agreed to develop the same into a residential subdivision and construct residential houses thereon. They agreed that they would divide the lots between them.
a) Does the JVA entered into by and between Weber and Prime create a separate taxable entity? Explain briefly.
b) Are the allocation and distribution of the saleable lots to Weber and Prime subject to income tax and to expanded withholding tax? Explain briefly.
c) Is the sale by Weber or Prime of their respective shares in the saleable lots to third parties subject to income tax and to expanded withholding tax? Explain briefly.
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IX.
a.
Yes. The JVA entered into by and between Weber and Prime is deemed a taxable partnership. A joint venture need not be undertaken in conformity with the usual requirements of the law on partnerships in order that one could be deemed so constituted for purposes of the tax on such entity. A partnership, no matter how created or organized, is taxable under the law.
b.
The allocation and distribution of the saleable lots to Weber and Prime are not subject to income tax and expanded withholding tax because until the lots are actually sold, no profits are realized.
c.
The sale by Weber or Prime of their respective shares in the saleable lots to third parties is subject to income tax because, then, there would already be flow of wealth.
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