G.R. No. L-25532 - Commissioner of Internal Revenue vs. Suter

On September 30, 1947, William J. Suter “Morcoin” Co., Ltd., a limited partnership, was organized with:

William J. Suter as general partner contributing ₱20,000.00
Julia Spirig and Gustav Carlson as limited partners contributing ₱18,000.00 and ₱2,000.00 respectively

On October 1, 1947, the partnership was registered with the SEC. It conducted importation, marketing, distribution, and operation of phonographs, radios, television sets, and amusement machines, maintained its own office, books, bank accounts, and secured a Central Bank quota.

In 1948, general partner Suter married limited partner Spirig.
On December 18, 1948, Carlson sold his ₱2,000.00 interest to Suter and Spirig; the sale was recorded with the SEC on December 20, 1948.

From inception until 1959, the limited partnership filed its income tax returns as if it were a corporation, without objection by the Commissioner of Internal Revenue.
In 1959 the Commissioner assessed a deficiency against Suter for 1954 (₱2,678.06) and 1955 (₱4,567.00), consolidating the partnership’s income with the individual incomes of Suter and Spirig under Section 45(d), NIRC. Suter protested; CTA reversed the assessment on November 11, 1965. The Commissioner appealed to the Supreme Court.

Whether the juridical personality of the limited partnership should be disregarded for income tax purposes, treating the spouses and the partnership as a single taxable unit under Section 45(d), NIRC.
Whether the 1948 marriage of Suter and Spirig and their acquisition of Carlson’s interest dissolved the limited partnership.