Computation of the Capital Gains Tax Due on the Property Acquired thru Mortgage Foreclosure Sale

September 15, 1988 BIR RULING NO. 449-88 21 (e) 000-00 449-88 Gentlemen : This refers to your letter dated June 29, 1988 requesting in effect a ruling regarding the computation of the capital gains tax due on the property acquired by you thru mortgage foreclosure sale. It is represented that the property of Mrs. Lolita Brandes was foreclosed by your bank on November 17, 1983, because of her failure to pay her loan account of P49,944.29; that you acquired the property as the sole bidder thereof at a public auction sale for the amount of P74,234.25 as appearing in the Sheriff's Certificate of Sale issued on March 8, 1988; and that in the computation of the capital gains tax due, you first deducted the amount of the loan from the bid price and that from the difference thereof, you deducted various expenses namely, publication fee, sheriff's fee, miscellaneous and certificate of sale. On the other hand, our Revenue District Officer based the 5% capital gains tax on the amount of P74,234.25. In reply, please be informed that the computation of our Revenue District Officer is correct. On the premise that the amount representing the capital gains tax forms part or is tacked with the real property which is already under the control and custody of the financial institution like you as mortgagee-transferee, you shall pay the 5% capital gains tax based on the selling price shown in the mortgage foreclosure sale which in this case is P74,234.25. (Revenue Memorandum Order No. 29-86, Par. 381) cdta On account of the above premise, there is no merit in your allegation that, under the computation of our Revenue District Officer, "we (you) should pay capital gains tax on our (your) money and the gain earned by our (your) money." Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner