MODULE 9:

TAX ON CO-OWNERSHIP, ESTATE AND

TRUST

Chendryck Bangkas
Marvin Vicente
Nimrod Jinon
CO-OWNERSHIP

Co-ownership arises when two or more heirs inherit an undivided property

from a decedent, or when a donor gifts an undivided property in favor of two or more
recipients. A property owned jointly by two or more people is referred to as co-
ownership in legal terminology. In the Philippines, the Civil Code is the main legal
framework that governs this arrangement. It is subject to certain regulations. The
relevant sections of the Civil Code, namely Articles 484 through 498, offer the
necessary legal structure to comprehend the rights, obligations, and co-ownership
dynamics.

A separate and undivided interest in the property is held by each co-owner

(see Art. 484). The co-owners split the entire ownership, and their respective
portions might or might not be equal. Every co-owner has an undivided interest in the
whole asset (Art. 485), which means they are entitled to the whole thing rather than
just a certain geographical area. The individual shares represent proportionate
interests in the overall asset when viewed as a whole, and the property is viewed as
such.

The law often assumes that co-owners have equal shares unless there is a
particular agreement specifying individual ownership shares. Evidence that
demonstrates the co-owners had a different aim, however, can refute this
assumption. The costs associated with maintenance, preservation, and
enhancement of the property are the joint and multiple duties of the co-owners. This
implies that each co-owner bears personal responsibility for the entire debt and that
any co-owner may be held fully liable.
 In most cases, co-owners have the right of redemption (Art. 492), which gives
them the first chance to buy a co-owner's share that they plan to sell. co-owners
have the authority to administer and utilize the common property, which helps to
preserve control over the co-ownership's composition. Commonly, co-owners decide
how to use and maintain the property together, and one co-owners activities
shouldn't interfere with the rights of the other co-owners.

Partitioning can be used to end co-ownership. This entails allocating the

property among the co-owners in accordance with their legally established or
agreed-upon portions. In the event that the co-owners are unable to come to an
amicable agreement, the court may order the property to be sold and the proceeds
divided among them. Co-owners may sign documents establishing their individual
shares, responsibilities, and rights. Co-owners must communicate and understand
one another clearly so as to prevent disputes and make sure the property is
managed well. Co-ownership is enduring and does not immediately end with the
death of one of the co-owners. If a co-owner passes away, their heirs will inherit their
share of the property according to the succession laws.

Co-ownership of property offers several benefits, including cost sharing,

access to better properties, shared responsibilities, risk mitigation, potential for
higher returns, flexibility in property use, complementary skills and resources, estate
planning and succession, potential tax benefits, and emotional and social support. It
allows individuals to pool resources, make it more affordable to acquire and maintain
a property, and share responsibilities such as maintenance and repairs. Co-owners
can also mitigate risks associated with property ownership, such as economic
downturns and unexpected expenses. The flexibility in property use allows for
diverse benefits, and the diversity of skills and resources can enhance decision-
making and problem-solving. Tax advantages may also be associated with co-
ownership.
 ARTICLE 484 – 498 SUMMARY OF CO-OWNERSHIP

Article 484: Definition of Co-ownership

 Co-ownership is the right of several persons to own undivided shares in a

property.

Article 485: Consequences of Co-ownership

 Co-owners shall own the property in common, with the presumption that their
shares are equal, unless proven otherwise.

Article 486: Rights of Co-owners

 Each co-owner has the right to use the property, provided it is in accordance
with its destination and the benefits of other co-owners. However, the use
must not injure the interests of the co-ownership or prevent the other co-
owners from using the property according to their rights.

Article 487: Equal Use of Common Property

 Any one of the co-owners may use the common property, provided they do so
without causing damage or injury to the interests of the other co-owners.

Article 488: Right to Lease

 The co-owners may lease their rights to a third person, but the lease must be
for a reasonable time and must not be prejudicial to the interests of the co-
ownership.

Article 489: Incidents of Possession in Co-ownership

 The possession of one co-owner is presumed to be for the benefit of all co-
owners unless there is evidence to the contrary.

Article 490: Actions of a Co-owner

 A co-owner may bring an action in ejectment. However, the action must be

brought against the third person and not against his co-owners.
Article 491: Co-ownership by Will or Intestacy

 The rights of a co-owner may be transmitted to his heirs.

Article 492: Right of Redemption

 The co-owners shall have a right of redemption when a share of a co-owner is

sold to a third person, giving them the option to buy the share before it is sold
to others.

Article 493: Agreement to Keep Property Undivided

 Co-owners may agree to keep the property undivided for a certain period not
exceeding ten years. This agreement must be in writing.

Article 494: No Co-owner Shall Be Obliged to Remain in Co-ownership

 No co-owner shall be obliged to remain in the co-ownership, and any co-

owner may demand at any time the partition of the thing owned in common.

Articles 495-498: Partition

 These articles discuss the different modes of partition, either by agreement,

by demand of a co-owner, or through a court-ordered partition. The court may
order a physical division of the property or its sale, with the proceeds to be
distributed among the co-owners according to their respective shares
QUESTIONS

1. Inherited property remained undivided for more than (10) years and no attempt
was ever made to divide the same among the co-heirs, nor was the property under
administration proceedings nor held in trust, the property should be considered as
owned by an registered partnership, consequently, taxable as corporation.

A. TRUE B. FALSE

2. Co-owners are taxed individually on their distributive share in the income of the
co-ownership.

A. TRUE B. FALSE

3. According to Article ______ , co-ownership is the right of several persons to own

undivided shares in a property.

A. Article 491 C. Article 489

B. Article 484 D. Article 493

4. A co-ownership that exist for the purpose of preserving or cultivating the property
is fully taxable.

A. TRUE B. FALSE

5. Co-ownership arises when two or more heirs inherit a divided property from a
decedent, or when a donor gifts an undivided property in favor of two or more
recipients.

A. TRUE B. FALSE
ANSWER KEY:

1. TRUE

2. TRUE

3. B. Article 484

4. FALSE

5. FALSE