Correct Basis for the Computation of the Capital Gains Tax in Cases of Foreclosure Sale
BIR Ruling No. 406-87 • Bureau of Internal Revenue (BIR) Issuances • Rulings (Numbered) • Dec 18, 1987
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December 18, 1987 BIR RULING NO. 406-87 21 (e) 223-87 406-87 Gentlemen : This refers to your letter dated November 13, 1987, requesting a ruling as to the correct basis for the computation of the capital gains tax in cases of foreclosure sale. In reply, I have the honor to inform you that the 5% capital gains tax imposed under Section 21(e) of the Tax Code, as amended by Executive Order No. 37, including the corresponding documentary stamp tax, become due after the mortgage foreclosure sale but before registration of the Certificate of Sale issued by the auctioneer conducting the foreclosure sale (BIR Ruling No. 138-87). Accordingly, you as the mortgagee-transferee shall pay the 5% capital gains tax and the corresponding documentary stamp tax based on the selling price (bid price) shown in the mortgage foreclosure sale (Sheriff's Certificate of Sale) or fair market value of the real property, whichever is the higher amount (Revenue Memorandum Order No. 29-86). The amount of loan secured by the mortgagee is not considered as basis in computing said taxes. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner
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