Tax Imposed on Real Properties Foreclosed by Banks

April 28, 1988 BIR RULING NO. 165-88 21 (e) 414-87 165-88 Gentlemen : This refers to your letter dated March 14, 1988 requesting a ruling whether or not real properties foreclosed by Banks, with the banks as purchaser, prior to September 3, 1986 are exempt from the payment of capital gains tax, and the required documents to be submitted to BIR Revenue District Office in cases of registration of the Certificate of Sale and Consolidation of title in your name. In reply thereto, please be informed that RMO No. 33-81 as amended by RMO No. 18-82 allowed the issuance of a Certificate authorizing the transfer of title to real property classified as capital asset even before payment of the capital gains tax if foreclosed by a bank, finance or insurance company thru a foreclosure sale. However, RMO No. 29-86 dated September 3, 1986 which revoked RMO No. 33-81 as amended by RMO No. 18-82 provides that no certificate authorizing transfer of title to real property classified as capital asset sold by an individual thru foreclosure sale shall be issued without prepayment of the capital gains tax including the documentary stamp tax. Considering, however, that RMO No. 29-86 applies to real property purchased by a bank, finance and insurance company thru mortgage foreclosure sales on or after September 3, 1986 and since, you are referring to mortgage foreclosure sales held prior to September 3, 1986, a Certificate authorizing the transfer of Title to real property may be issued to you before payment of the capital gains tax. cdtech Moreover, while title to the aforesaid foreclosed properties can be consolidated in your favor without the prepayment of the capital gains tax prescribed by then Section 34(h) [now Sec. 21(e)] of the Tax Code, as amended, said tax shall nevertheless be paid and collected from the debtor-mortgagor by the Revenue District Officer of the place where such debtor-mortgagor has his legal residence or principal place of business who shall, for this purpose, conduct the necessary investigation to ascertain the capital gains tax due from the debtor-mortgagor in accordance with the procedure prescribed by Revenue Memorandum Order No. 21-80 dated May 28, 1980. (RMO No. 33-81 as amended by RMO No. 18-82) Furthermore, the Sheriff's Deed of Sale is subject to documentary stamp tax based on the consideration or value received or paid for the land as stated on said Deed pursuant to Section 196 of the Tax Code, as amended. Finally, with respect to your inquiry as to the documents required to be submitted to the BIR Revenue District Office, a certified true copy of the mortgage foreclosure sale should be submitted. cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner