Transfer of Title to Foreclosed Property may be Issued to the Mortgagee Before Payment of the Capital Gains Tax

October 9, 1987 BIR RULING NO. 313-87 21 (e) 178-87 313-87 Gentlemen : This refers to your letter dated September 11, 1987 stating that in view of Revenue Memorandum Order No. 29-86 you would like to request for a ruling exempting you from the payment of capital gains tax and documentary stamp tax on the mortgaged property you acquired, as a highest bidder, in an extra-judicial foreclosure sale conducted by the ex-officio sheriff of Bacoor, Cavite on March 15, 1986; and that your promise for such exemption is that the said sale was consummated prior to the effectivity of the aforementioned Revenue Memorandum Order. 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 pre-payment of the capital gains tax including the documentary stamp tax. Considering, however, that RMO No. 20-86 applies to real property purchased by a bank, finance and insurance company thru mortgage foreclosure sale on or after September 3, 1986 and since the mortgage foreclosure sale in this case was held on March 15, 1986 or prior to September 3, 1986, a Certificate authorizing the transfer of title to the aforesaid property may be issued to you before payment of the capital gains tax. Moreover, while title to the aforesaid foreclosed property 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 prescribed by Revenue Memorandum Order No. 21-80 dated May 28, 1980. (RMO No. 33-81 as amended by RMO No. 18-82) Finally 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