No. Since Hopeful Corporation exercised its right to redeem the property, Generous Bank is not liable to pay capital gains tax on the foreclosure…

The question

No. Since Hopeful Corporation exercised its right to redeem the property, Generous Bank is not liable to pay capital gains tax on the foreclosure sale. As stated in the analogous case of Supreme Transliner, Inc., v. BPI Family Savings Bank, Inc. (G.R. No. 165617, February 25, 2011, 644 SCRA 59), Rev. Regs. No. 4-99 expressly provides that if a mortgagor exercises his right of redemption within one year from the issuance of the certificate of sale, no capital gains tax shall be imposed because no sale or transfer of real property was realized. It is only in case of non-redemption by Hopeful Corporation that the obligation to pay capital gains tax arises, which shall be based on the bid price of the highest bidder. The tax will be imposed only upon the expiration of the one-year period of redemption. Furthermore, the obligation to pay the capital gains tax would primarily fall on the mortgagor, Hopeful Corporation, and not on Generous Bank. Mr. A was preparing his income tax return and had some doubt on whether a commission he earned should be declared for the current year or for the succeeding year. He sought the opinion of his lawyer who advised him to report the commission in the succeeding year. He heeded his lawyer's advice and reported the commission in the succeeding year. The lawyer's advice turned out to be wrong; in Mr. A's petition against the BIR assessment, the court ruled against Mr. A. Is Mr. A guilty of fraud? (2013 Bar Question)

1. A.Mr. A is not guilty of fraud as he simply followed the advice of his lawyer.
2. B.Mr. A is guilty of fraud; he deliberately did not report the commission in the current year when he should have done so.
3. C.Mr. A's lawyer should pay the tax for giving the wrong advice.
4. D.Mr. A is guilty for failing to consult his accountant.

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