SUPREME TRANSLINER, INC. VS. BPI FAMILY SAVINGS BANK, INC.- Capital Gains Tax

FACTS:

Supreme Transliner took out a loan from respondent and was unable to pay. The respondent bank extrajudicially foreclosed the collateral and, before the expiration of the one-year redemption period, the mortgagors notified the bank of its intention to redeem the property.

ISSUE:

Is the mortgagee-bank liable to pay the capital gains tax upon the execution of the certificate of sale and before the expiry of the redemption period?

HELD:

NO. It is clear that in foreclosure sale there is no actual transfer of the mortgaged real property until after the expiration of the one-year period and title is consolidated in the name of the mortgagee in case of non-redemption. This is because before the period expires there is yet no transfer of title and no profit or gain is realized by the mortgagor.