Payment of Capital Gains Tax on Real Property Sold at a Public Auction Sale

May 29, 1987 BIR RULING NO. 146-87 34 (h) 89-85 146-87 S i r : This refers to your letter dated March 5, 1987 requesting for the issuance of a tax clearance to effect the transfer and registration of real property sold at a public auction sale to the spouses Emiliano Madriaga and Marlene I. Madriaga. It appears that the spouses Emiliano Madriaga and Marlene I. Madriaga were adjudged the highest bidders at a public auction sale held on July 23, 1982 of a parcel of land and improvements located at Barrio Namuco, Rosario, Batangas and covered by TCT No. T-42396, that the debtor-mortgagor failed to redeem the property within the period of redemption; and that a sheriff's final Deed of Sale in Execution was issued on March 8, 1985 in favor of said spouses in accordance with said court order. Based on the foregoing facts, capital gains tax is payable by Ms. Gliceria Quinay, the debtor-mortgagor if she realized a taxable income on account of her disposition of the capital asset. The income is realized if the proceeds of the loan exceed the cost of the property mortgaged. (Revenue Memorandum Order No. 33-81) Accordingly, before the Revenue District Officer of Batangas City issues a certification authorizing transfer of title over the property, the capital gains tax imposed by Section 34(h) of the Tax Code prior to its amendment by Executive Order No. 37 should be paid. Moreover, the sheriff's Final Deed of Sale is subject to documentary stamp tax pursuant to Section 209 of the Tax Code. adc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner