Issuance of a Certificate of Transfer of Title to Real Property Before Payment of the Capital Gains Tax

August 16, 1988 BIR RULING NO. 391-88 21 (e) 263-87 391-88 Gentlemen : This refers to your letter dated January 13, 1988 which was referred to this Office by the Regional Director, Revenue Region No. 5, Legaspi City, for resolution of the issue whether or not RMO No. 29-86 can be applied on the property you acquired on June 27, 1986 as highest bidder in a mortgage foreclosure sale. It is represented that Dr. Dionedes I. Coralde obtained a loan of P60,000.00 from you secured by a real estate mortgage on his property covered by TCT No. 24127 situated at Rawis, Legaspi City; that you foreclosed the mortgage on said property on June 27, 1986 and acquired the same as lone and highest bidder in a public auction for and in consideration of the total amount of P134,783.21; that for the purpose of consolidating ownership over the said foreclosed property, you requested the Revenue District Office of Legaspi City to issue a certificate authorizing transfer of title to real property pursuant to Revenue Memorandum Order No. 33-81; and that Ms. Lydia G. Empleo of said office denied your request by invoking Revenue Memorandum Order No. 29-86 dated September 3, 1986 which revoked Revenue Memorandum Order No. 33-81. In reply, please be informed that RMO No. 33-81 as amended by RMO No. 18-82 allowed the issuance of a certificate 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 the mortgage foreclosure sale in this case was held on June 27, 1986 or prior to September 3, 1986, a certificate authorizing the transfer of title to the aforementioned property may be issued to you before payment of the capital gains tax. Such being the case, 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(c) of the Tax Code, as amended, 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, 1989 (RMO No. 33-81 as amended by RMO NO. 18-82) aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner