Sale by the Taxpayer of a Property Placed Under the Tax Lien Wherein the Buyer Has Offered a Bid to Buy the Property at the Public Auction Sale

November 27, 1987 BIR RULING NO. 387-87 265 000-00 387-87 S i r : This refers to your letter dated November 11, 1987 requesting a ruling on the following questions: "1) How much should be the minimum amount of bid on the property belonging to subject taxpayer which has been set for public auction sale on December 1, 1987 considering that the fair market value is only about P56,000.00 while the tax liability is P1,247,009.23? "2) If the minimum amount of bid should be the amount of tax liability pursuant to Sec. 265 of the Tax Code and the property has to be forfeited in favor of the government for want of bidder who could offer a bid for the same amount, will this not be in conflict with Section 267 of the Tax Code which allows further levy on any other property or properties of the taxpayer until the entire tax liability should have been fully satisfied?" The foregoing questions were raised in connection with the sale by the taxpayer of a property already placed under the tax lien wherein the buyer, a third person, has offered a bid to buy the property at the public auction sale. In reply, please be informed as follows: 1. The minimum amount of the bid should be in the vicinity of the fair market value of P56,000.00 in which case, the tax liability of the taxpayer shall be deemed satisfied only to that extent. This opinion is supported by Section 265 of the Tax Code to the effect that in the absence of bidders, the taxpayer's property to be "forfeited to the Government in satisfaction of the claim in question", does not operate to satisfy the total tax claims even beyond the value of the property forfeited, but was intended to mean only discharge pro tanto of the tax liabilities. (Aranas, Annotations and Jurisprudence on the National Internal Revenue Code, 1979, 5th Ed., p. 627) 2. By a parity of reasoning, where the minimum amount of the bid sought is equal to the tax liability but none offered a bid to that extent, the property shall be forfeited but the tax liability shall be satisfied only to the extent of the fair market value. Thereafter, the remedy of distraint and levy may be repeated until the full amount due is collected pursuant to Section 267 of the Tax Code. There is no conflict between Sections 265 and 267 because satisfaction of liability by forfeiture under the former is only partial. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner