Applicability of RMO No. 29-86 on Capital Gains Tax on Extrajudicial Foreclosure Sale

June 10, 1988 BIR RULING NO. 255-88 21 (e) 313-87 255-88 Gentlemen : This refers to your letter dated July 21, 1987 requesting clarification from this Office as to the extent of the applicability of Revenue Memorandum Order No. 29-86, specially on capital gains tax on extrajudicial foreclosure sale conducted prior to the effectivity of said Memorandum Order. It is represented that one of our employees has opined that you are required by law to pay the capital gains tax based on the selling price as shown in the mortgage foreclosure sale even if the sale took place before the effectivity of Revenue Memorandum Order No. 29-86; that the said employee opined further that you are no longer exempt from paying the said capital gains tax since tax Revenue Memorandum Order No. 33-81, as amended by Revenue Memorandum Order No. 18-82 exempting you from paying such tax has been amended by Revenue Memorandum Order No. 29-86; and that it is your contention that RMO No. 29-86 does not apply to extrajudicial foreclosure sale conducted prior to its effectivity. cdti In reply, I have the honor to inform you that RMO No. 33-81 as amended by RMO No. 18-82 allowed the issuance of a Certification 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 sale 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. Moreover, while title to real property foreclosed prior to September 3, 1986 can be consolidated in your favor without the prepayment of the capital gains tax prescribed by Section 21(e) of the Tax Code, as amended by Executive Order No. 37, 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 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 209 of the Tax Code, as amended. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner