G.R. No.

L-24248 July 31, 1974

ANTONIO TUASON, JR., petitioner,

vs.
JOSE B. LINGAD, as Commissioner of Internal Revenue, respondent.

D O C T R I N E:

The term "capital assets" includes all the properties of a taxpayer whether or not
connected with his trade or business, except: (1) stock in trade or other property
included in the taxpayer's inventory; (2) property primarily for sale to customers in the
ordinary course of his trade or business; (3) property used in the trade or business of
the taxpayer and subject to depreciation allowance; and (4) real property used in trade
or business. If the taxpayer sells or exchanges any of the properties above-enumerated,
any gain or loss relative thereto is an ordinary gain or an ordinary loss; the gain or loss
from the sale or exchange of all other properties of the taxpayer is a capital gain or a
capital loss.

Under section 34(b) (2) of the Tax Code, if a gain is realized by a taxpayer (other than
a corporation) from the sale or exchange of capital assets held for more than twelve
months, only 50% of the net capital gain shall be taken into account in computing the
net income.

The Tax Code's provision on so-called long-term capital gains constitutes a statute of
partial exemption. In view of the familiar and settled rule that tax exemptions are
construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority, the field of application of the term it "capital assets" is necessarily narrow,
while its exclusions must be interpreted broadly. Consequently, it is the taxpayer's
burden to bring himself clearly and squarely within the terms of a tax-exempting
statutory provision, otherwise, all fair doubts will be resolved against him. It bears
emphasis nonetheless that in the determination of whether a piece of property is a
capital asset or an ordinary asset, a careful examination and weighing of all
circumstances revealed in each case must be made.
 G.R. No. 165617, February 25, 2011

SUPREME TRANSLINER, INC., MOISES C. ALVAREZ AND PAULITA S.

ALVAREZ, petitioners,
vs.
BPI FAMILY SAVINGS BANK, INC., respondent.

D O C T R I N E:

Under Revenue Regulations No. 13-85 (December 12, 1985), every sale or exchange or
other disposition of real property classified as capital asset under Section 34(a) of
the Tax Code shall be subject to the final capital gains tax. The term sale
includes pacto de retro and other forms of conditional sale. Section 2.2 of Revenue
Memorandum Order No. 29-86 (as amended by RMO No. 16-88 and as further
amended by RMO Nos. 27-89 and 6-92) states that these conditional sales "necessarily
include mortgage foreclosure sales (judicial and extrajudicial foreclosure sales)."
Further, for real property foreclosed by a bank on or after September 3, 1986, the
capital gains tax and documentary stamp tax must be paid before title to the property
can be consolidated in favor of the bank.

Under Section 63 of Presidential Decree No. 1529 otherwise known as the Property
Registration Decree, if no right of redemption exists, the certificate of title of the
mortgagor shall be cancelled, and a new certificate issued in the name of the
purchaser. But where the right of redemption exists, the certificate of title of the
mortgagor shall not be cancelled, but the certificate of sale and the order confirming
the sale shall be registered by brief memorandum thereof made by the Register of
Deeds upon the certificate of title. In the event the property is redeemed, the
certificate or deed of redemption shall be filed with the Register of Deeds, and a brief
memorandum thereof shall be made by the Register of Deeds on the certificate of title.

It is therefore clear that in foreclosure sale, there is no actual transfer of the mortgaged
real property until after the expiration of the one-year redemption period as provided in
Act No. 3135 and title thereto is consolidated in the name of the mortgagee in case of
non-redemption. In the interim, the mortgagor is given the option whether or not to
redeem the real property. The issuance of the Certificate of Sale does not by itself
transfer ownership.