Request for Authority to Exercise the Option Given to Seller under Section 21 (e) of the Tax Code

September 9, 1987 BIR RULING NO. 275-87 21-e 138-87 275-87 Gentlemen : This refers to your letter dated January 15, 1987 requesting a ruling as to whether your Dipolog Branch, as attorney-in-fact of the mortgagor (an individual), can be allowed to exercise the option of the individual owner/transferor as regards the determination of his tax liability on the gain derived from the sale of his real property to the government or any of its political subdivisions or agencies or to government owned or controlled corporations either under Sections 21(a) or 21(e) of the Tax Code, as amended by Executive Order No. 37. You contended that you can exercise the option since you are the attorney-in-fact of the individual mortgagor as stated in all PNB Real Estate Mortgage Contracts, and that you, as the mortgagee-transferee, is a government-owned or controlled corporation. In reply thereto, I have the honor to inform you that pursuant to Section 21(e) of the Tax Code, as amended by Executive Order No. 37 in case of sale or other disposition of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations, the tax liability on the gain derived from the sale shall be determined under Section 21(a) or 21(e) of the Tax Code at the option of the seller. In other words, such option shall be exercised by the seller himself. In the instant case, your Dipolog Branch was appointed attorney-in-fact by the mortgagor to sell the property mortgaged under Act No. 3135, i.e., in cases of extra-judicial foreclosures. As such attorney-in-fact, your Dipolog Branch was not authorized to exercise the option given to seller under Section 21 (e) of the Tax Code. Moreover, on the premise that the amount representing the capital gains tax forms part or is tacked with the real property which already is under your control and custody as mortgagee-transferee, you shall pay the 5% capital gains tax based on the selling price shown in the mortgage foreclosure sale. (Revenue Memorandum Order No. 29-86). Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner