Clarification on the Sale of Acquired Assets

July 9, 1990 BIR RULING NO. 132-90 24 (a) 514-88 132-90 Gentlemen : This refers to your letters dated February 1, 1990 and April 5, 1990, in effect, requesting clarification whether your sale of acquired assets is subject to the expanded withholding tax under Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90. casia In reply, please be informed that the acquired assets of the bank or finance companies may consist of (1) real properties acquired under a mortgage foreclosure sale title to which have already been consolidated in the name of the bank of the 5% capital gains tax paid as mortgagee-transferee pursuant to Revenue Memorandum Order No. 16-88 (BIR Ruling No. 514-88); or (2) real properties acquired under a mortgage foreclosure sale and, although the one (1) year redemption period had lapsed, title thereto has not yet been consolidated in the name of the bank. If a real property was already entitled in the name of the Bank, the same shall be treated as capital assets having been acquired and held in the course of trade or business which is banking; hence, when sold, the bank shall be taxed on the capital gains realized therefrom pursuant to Section 24 (a) in relation to Section 33 (a) (1) both of the Tax Code. On the other hand, if the real property has not yet been titled in the name of the bank and the one (1) year redemption period had lapsed, the bank, as the mortgagee-transferee, will still be liable for the 5% capital gains tax pursuant to Revenue Memorandum Order No. 27-89. Once the property is titled in the bank's name, it shall be treated as the capital asset of the bank which, when sold, will generate capital gains pursuant to Section 33 (a) (2) of the Tax Code subject to the corporate income tax under Section 24(a) of the Tax Code. Such being the case, your sale of acquired assets consisting of real properties above-described shall be subject to the creditable withholding tax pursuant to Revenue Regulations No. 1-90. Very truly yours, (SGD.) JOSE U. ONG Commissioner