BIR Ruling No. 142-96

December 19, 1996 BIR RULING NO. 142-96 RMO 41-91 000-00 142-96 A. M. Sison, Jr. & Associates Suite 2002-A 6776 Ayala Avenue Condominium 6776 Ayala Avenue, Makati City Attention: Atty . Nelson D . Empalmado Gentlemen : This refers to your letter dated June 11, 1996 stating that your client, Palawan Quicksilver Mines, Inc., is the owner of a certain parcel of land containing an area of 110 hectares situated in Puerto Princesa, Palawan; that the said land was mortgaged to Camarines Minerals, Inc. and the payment of the loan is long overdue; that efforts have been exerted to look for buyer of said land so that the proceeds therefor may be used to pay your client's debts but due to pollution in said land caused by mining residue and squatters, interested buyers are hard to find and those interested offer to buy the land at a very low price which is even lower than the zonal valuation; and that the mortgagee is about to foreclose the property and sell it through public bidding but you anticipate that the bid might be low due to the prevailing adverse circumstances. Based on the foregoing, you are requesting for a ruling as to the basis of the taxes due by reason of foreclosure sale in the event that the winning bid is below the zonal valuation of the said land. In reply, please be informed that pursuant to Revenue Memorandum Order No. 41-91, in all cases involving sale, exchange or any disposition of real property, the tax base for documentary stamp tax purposes shall be the same as the tax base used in the computation of the capital gains tax which means gross selling price, fair market value, or zonal value of the real property, whichever is higher, except in the sale of real property effected through public bidding, e.g., judicial sale, extrajudicial foreclosure sale, where both the 5% capital gains tax and documentary stamp tax are computed based on the highest or winning bid price. In view thereof, and in line with said Revenue Memorandum Order No. 41-91, this Office is of the opinion and so holds that the tax base in the instant case should be based on the highest or winning bid price and not on the zonal valuation. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue