Tax Base to be Used in Computation of Capital Gains Tax and Documentary Stamp Tax in Disposition of Real Property

May 28, 1992 BIR RULING NO. 172-92 21 (e) 118-91 172-92 Rizal Commercial & Banking Corporation Tacloban Branch Salazar corner P. Zamora Streets Tacloban City Attention: Mr . Rogelio E . Abella General Manager Gentlemen : This refers to your letter dated September 3, 1991 stating that you have paid under protest the amount of P226,655.44 as capital gains tax on the real estate purchased by your Bank in a foreclosure of real estate mortgage under Act 3135/4118 as amended from the mortgagors-debtor's thereof. Relative thereto, you would like to be advised about the correct basis for computing the capital gains tax. It is represented that the Rizal Commercial & Banking Corporation, Tacloban Branch, purchased at public auction two parcels of land, described herein below, for the consideration of four hundred ninety-two thousand nine hundred seventy six pesos and fifty-nine centavos (h/492,976.59): T 3945 "A parcel of land, Lot No. 4195-D of the subdivision plan pad 08-002739, being a portion of lot 4195 of Tacloban Cad. LRD Rec. No., situated at Bgy. Dist., Tacloban City, containing an area of 12,728 sq. meters more or less." T 3945 "A parcel of land (Lot No. 4195-A) of the subdivision plan pad 08-002739, being a portion of Lot No: 4195 of Tacloban Cadastre located at Bgy. Dist., Tacloban City, containing an area of 1,619 sq. meters more or less." that said transaction is reflected in the Sheriff's Certificate of Sale, dated April 17, 1989; that after the lapse of the redemption period and upon the consolidation of the Bank's title to the hereinbefore, described properties, an assessment for the 5% capital gains tax was issued by the District Officer of RDO # 65, itemized as follows: " Assessment No. 504 Basic Tax Due P121,949.30 Surcharge 30,487.39 Interest 20,319.83 Compromise 12,000.00 P184,756.71 ========= that subsequently, you paid under protest the amount of P226,655.44, per Manager's Check No. 9920; and finally, that you are of the opinion that the basis for the computation of the capital gains tax in this instance should not be the zonal valuation of the properties involved but the actual consideration appearing in the Sheriff's Certificate of Sale. In reply, please be informed that in all cases involving sale, exchange or any disposition of real property, the tax base to be used in the computation of both the capital gains tax and documentary stamp tax shall be the same which means, gross selling price, fair market value or zonal value of the real property whichever is higher, except in the case of sale of real property effected through public bidding, e.g., judicial sale; extrajudicial foreclosure sale, where both the 5% capital gains tax and the documentary stamp tax shall be computed based on the highest or winning bid price. (BIR Ruling Nos. 101-89; 118-91; RMC 41-91) Accordingly, the computation of the capital gains tax in this case should be based on the highest bid/actual consideration appearing in the Sheriff's Certificate of Sale, or the sum of P492,976.59. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue