Final Deed of Sale Executed by and between the Republic of the Philippines thru the Bureau of Internal Revenue and the Highest Bidder in a Public Auction Sale of Levied Property Exempt from Payment of Taxes

April 15, 1997 BIR RULING NO. 054-97 21 (e), 173 50 (b), 196 000-00-054-97 Ms. Zecel Arevalo Bregaudit No. 10 A. Bonifacio Drive Ayala Heights Subd. Quezon City M a d a m : This refers to your letter dated July 3, 1996 requesting for a ruling that the Final Deed of sale executed by and between the Republic of the Philippines thru the Bureau of Internal revenue represented by the Deputy Commissioner for Operation, Beethoven R. Rualo, as Vendor and you, as Vendee, being the highest bidder in a public auction sale of the levied property of Ceres G. Pajaron covered by TCT No. 363977 held on February 21, 1994 is exempt from the payment of taxes. Documents submitted show that Mrs. Ceres G. Pajaron married to Crispin Pajaron is the registered owner of a parcel of land including improvements existing thereon situated at No. 57 Scout Delgado St., Quezon City covered by TCT No. (363977) PR-9270 issued by the Registry of Deeds of Quezon City; that Mrs. Ceres G. Pajaron has an outstanding deficiency income tax liability for Fiscal Year 1990 in the sum of P25,280,258.70 under an unnumbered assessment dated September 28, 1993; that for failure of Mrs. Ceres G. Pajaron to pay her said tax liability, a Notice of Tax Lien/Levy was caused by this Office to be annotated at the back of TCT No. (363977) PR9270 on August 24, 1993 and January 4, 1994; that on February 21, 1994, a public auction sale was held at the lobby of the BIR National Office Building, Diliman, Quezon City whereby the said property of Mrs. Ceres G. Pajaron was sold to the highest bidder, Ms. Zecel A. Bregaudit, for the sum of One Million Eight Hundred Thousand Pesos (P1,800,000.00) to partially satisfy, the said tax liability of Mrs. Ceres G. Pajaron as evidenced by Certificate of Sale of Real Property to Satisfy Tax Liability issued by this Office pursuant to the first paragraph of section 214 of the Tax Code; that the said sale transaction was subject to the one (1) year period of redemption reckoned from April 7, 1994, the date of registration of the said Certificate of Sale with the Registry of Deeds of Quezon City; and that for failure of Mrs. Ceres G. Pajaron to redeem her said property within the said period of redemption under Section 215 of the Tax Code a Final Deed of Absolute Sale was executed by and between the Republic of the Philippines thru this Office represented by the Deputy Commissioner for Operation, Beethoven L. Rualo, as Vendor, and Mrs. Zecel A. Bregaudit, the highest bidder in the aforementioned auction sale, as Vendee on July 12, 1996 whereby the property in question including improvements existing thereon was transferred and conveyed by the former in favor of the latter. In reply, please be informed that the aforementioned sale transaction between you, as Vendee and the Republic of the Philippines thru this Office, as Vendor whereby the levied property of Ms. Ceres G. Pajaron situated at No. 57 Scout Delgado Street, Quezon City covered by Transfer Certificate of Title No. (363977) PR9270 issued by the Registry of Deeds of Quezon City, was sold, transferred and conveyed in your favor is not subject to the creditable expanded withholding tax prescribed under Revenue Regulations No. 6-85 as amended by Revenue Regulations No. 1-90 and Revenue Regulations No. 12-94 implementing Section 50 (b) of the Tax Code, as amended and to the capital gains tax imposed under Section 21 (e) of the Tax Code, as amended; since the taxes imposed thereunder are both in the nature of income tax which is not applicable in the instant case, considering that the said sale was pursued as a civil remedy in order to partially satisfy the outstanding deficiency income tax liability of Ms. Ceres G. Pajaron for taxable year 1990 in the amount of P25,280,258.70. In other words the aforementioned sale transaction was pursued by this Office in the course of its primary function of enforcing tax laws. However, the Final Deed of Absolute Sale that you and the Republic of the Philippines thru this Office executed on July 12, 1996 is subject to the documentary stamp tax under Section 196 of the Tax Code, as amended by R.A. No. 7660 (Sec. 165, Revised Documentary Stamp Tax Regulations) based on the bid price which in this case shall be paid by the vendee, Ms. Zecel A. Bregaudit pursuant to Section 173 of the Tax Code, as amended. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue