Association of persons not formed where co-purchasers held and sold land in separately funded shares, barring assessment on the group.
Separate contributions to the purchase price, defined fractional ownership, and pro rata receipt of sale proceeds showed that the co-purchasers did not act as a common adventure or combine as a unit to earn income. On those facts, no association of persons arose for assessment of the surplus on sale of the land, and the attempted assessment on the alleged association was not sustainable; the prior assessment of one member on the same disclosed facts also barred a fresh assessment on the association.
Issues: Whether the three co-purchasers constituted an association of persons for the purpose of assessment of the surplus on sale of the land, and whether assessment on the association was barred after one member had already been assessed on her share.
Analysis: The purchase deed recorded the respective contributions of the parties and showed that the consideration came from separate funds, with one co-purchaser having a half share and the other two having equal shares in the remaining interest. The land was held without improvement and was later sold on the basis of the same defined shares, with sale consideration received pro rata and separately. On these facts, there was no evidence of a common adventure or of persons coming together as a unit to earn income, and a common purchase deed or common sale deed alone was insufficient to create an association of persons. Further, one member had already been assessed on full disclosure of the relevant facts, and that earlier assessment precluded a fresh assessment on the association.
Conclusion: The co-purchasers did not constitute an association of persons, and the attempted assessment on the association was not sustainable; the revenue's appeal failed.
Final Conclusion: Separate contributions to purchase consideration and separate entitlement to sale proceeds prevented the formation of an association of persons, and the prior assessment of a member barred assessment on the alleged association.
Ratio Decidendi: Where co-owners acquire and dispose of property in proportion to separately contributed funds and receive sale proceeds pro rata without combining as a unit, no association of persons is formed; an assessment on the association is also not maintainable after one member has already been assessed on the same disclosed facts.
TaxTMI 
AI Drafter ✕
TaxTMI 
