General Rule 89-21 of the Income Tax Act / [Judgment of non-taxation for one house for one household with a special contract for sale]

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

A. On May 17, 1978, the Plaintiff acquired ○○○○-dong ○○○○○○○○○○-dong on 198.3 square meters on and around June 3, 1982, and newly built 261.19 square meters of the total floor area on the above land, and the 1st floor underground of the flat 2nd roof on the ground of Pyeongtaek 3, 1982, and completed the registration of preservation of ownership on July 2, 1982 (hereinafter referred to as the “instant housing,” and the said housing site is referred to as the “land annexed to the instant case”); thereafter, transferred to the United States around October 14, 1983.

B. Around January 26, 2005, the Plaintiff sold the instant house and appurtenant land to KRW 1,080,000,000, and the intermediate payment of KRW 400,000,000 to KRW 580,000,000 from February 28, 2005, respectively, received the remainder payment of KRW 580,000,000 from the buyer on March 31, 2005, and upon the buyer’s request after the receipt of intermediate payment, allowed the removal of the instant house, and the removal was concluded a sales contract with the buyer upon delegation by the seller.

C. The instant house was removed on March 15, 2005 in accordance with the foregoing special agreement for sale, and the ownership transfer registration was completed on March 21, 2005 in the name of Cho○-○ and Kim○-○ on March 21, 2005. The Plaintiff did not own any other house in Korea except the instant house at the time of the conclusion and removal of the said sales contract.

D. On the other hand, on March 16, 2005, the day following the removal of the instant apartment, the Plaintiff acquired an apartment building No. 1303, 00, 000, 00 ○○○○○○○○○○○○○○○○○, 103, 1303 (hereinafter referred to as the “instant apartment building”) by sale and possessed until the time the ownership transfer registration for the instant appurtenant land has been filed.

E. On June 30, 2005, when the Plaintiff filed a scheduled return of capital gains tax on the transfer of the instant house and appurtenant land, the Plaintiff paid capital gains tax pursuant to Article 160(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same) on the ground that the said transfer constitutes a transfer of one house for one household, a high-priced house under Articles 95(3) and 89 subparag. 3 of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same) on the ground that the said transfer constitutes a transfer of one house for one household, a high-priced house under Articles 95(3) and 89 subparag. 3 of the former Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same).

F. On November 7, 2005, the Defendant owned the apartment house of this case at the time when the Plaintiff completed the registration of ownership transfer for the instant appurtenant land to Cho○○ and Kim○○, and thus, it cannot be deemed that the transfer of the instant apartment house and appurtenant land is a transfer of one house for one household under Article 95(3) and Article 89 subparag. 3 of the former Income Tax Act. Therefore, there is no room to apply Article 160(1) of the former Enforcement Decree of the Income Tax Act, which is a special provision on the “one house for one household” which is a high-priced house, on the ground that there is no room to apply Article 160(1) of the former Enforcement Decree of the Income Tax Act, which is the special provision on “one house for one household”, the transfer value of the instant house and appurtenant land is 259,526,630 won which is the acquisition value, and 3,762,338 won which is the necessary expenses and 816,711,032 won which is deducted.

[Ground of recognition] Evidence Nos. 1 through 5, Evidence Nos. 1 to 5, Evidence Nos. 2-1 to 4, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The plaintiff: although the ground for the defendant's disposition of this case is that the plaintiff is the owner of two houses, the plaintiff's acquisition of this case's apartment on March 16, 2005. The plaintiff lost its ownership on March 15, 2005, the preceding day, as the plaintiff lost its ownership. In addition, according to the basic provisions of the Income Tax Act, the plaintiff's disposition of this case's housing and appurtenant land should be based on the date of the sales contract in cases where the plaintiff destroyed the house corresponding to "one house for one household" under the special agreement for sale before the transfer date after the sales contract was made. Thus, the issue of whether the transfer of the house of this case and appurtenant land constitutes "one house for one household" shall be based on January 26, 2005, which is the date of the sales contract. Accordingly, at the time of the conclusion of the sales contract of this case, the plaintiff only owned the house of this case.

(2) Defendant: (a) If only one house is owned in Korea, if a resident transfers one house in Korea to a nonresident due to the moving-in of a foreign country, etc., the provisions of “one house for one household” shall be applied without any restriction on holding period, but even in this case, the provisions of Article 154(1) proviso of the former Enforcement Decree of the Income Tax Act shall be applied only when one household possesses one house in Korea as of the date of transfer under the proviso of Article 154(1) proviso of the former Enforcement Decree of the Income Tax Act; (b) since the Plaintiff possessed two houses as of the date of transfer of the instant house, the transfer of the instant house and appurtenant land is not subject to Article 95(3) of the former Income Tax Act;

B. Relevant statutes

former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

Article 89: Non-taxable Transfer Income

No income tax (hereinafter referred to as “transfer income tax”) shall be levied on the following incomes:

3. Income accruing from a transfer of such one house for one household as prescribed by the Presidential Decree (excluding expensive houses whose prices exceed the standard prescribed by the Presidential Decree) and the appurtenant land within the area calculated by multiplying the area of land to which the building is built by the ratio as determined by region under the Presidential Decree

Article 95 (Transfer Income Amount)

(1) The transfer income amount shall be the amount calculated by deducting the special long-term holding deduction amount from the amount (hereinafter referred to as “transfer marginal profits”) obtained by deducting the necessary expenses under Article 97 from the total gross income amount of transfer income under Article 94 (hereinafter referred to as “transfer value”).

(3) Notwithstanding the provisions of paragraph (1), gains on transfer and the amount of special long-term holding deduction for assets falling under expensive houses (including land appurtenant thereto) excluded from the object of non-taxation on transfer income under subparagraph 3 of Article 89, shall be the amount calculated under the conditions as prescribed

Enforcement Decree of the former Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005)

○ 154 Scope of housing for one household

(1) The term “one house for one household as prescribed by the Presidential Decree” in subparagraph 3 of Article 89 of the Act means the case where a household comprised by a resident and his spouse together with the family living together with the same address or same residence (hereinafter referred to as a “one household”) in Korea as of the date of transfer, and where the relevant house is held for not less than 3 years (in the case of a house located in a subdivision, day, mountain village, mountain village, mountain village, mountain village, or new urban area designated and publicly notified as a planned area for housing site development under Article 3 of the Housing Site Development Promotion Act, the relevant house is held for not less than 3 years and the period of residence is not less than 2 years during the retention period): Provided, That where one household possesses one house in Korea as of the date of transfer and falls under any of the following subparagraphs, its retention period and residing period shall not be restricted:

1. Where a constructed house for lease under the Rental Housing Act is acquired and transferred, if the dwelling period from the date of leasing the relevant constructed house for lease to the date of transferring the relevant house is five years or longer;

2. The case falling under one of the following subparagraphs. In this case, the remaining house and its appurtenant land which are transferred within two years from the relevant transfer date or expropriation date shall be deemed to be included in the cases of items (a) and (b):

(a) Where the whole or part of the house and its appurtenant land are purchased by consultation or expropriated under the Act on the Acquisition of Land, etc. for Public Works and the Compensation Therefor or expropriated under other Acts;

(b) Deleted;

(c) Emigration or other cases prescribed by the Ordinance of the Ministry of Finance and Economy;

○ Calculation of transfer marginal profits, etc. on expensive houses Article 160

(1) The gains on transfer and the amount of special long-term holding deduction for assets falling under the expensive houses under Article 95 (3) of the Act shall be the amount calculated by the formula in each of the following subparagraphs. In this case, where the relevant housing or lands appurtenant thereto fall under the assets transferred without registration, the relevant housing or lands appurtenant thereto shall be calculated by multiplying 600 million won by the ratio occupied by the transfer value of relevant housing or lands appurtenant thereto in the aggregate of the transfer value

1. Transfer margin applicable to the assets falling under expensive houses;

Transfer margin X (transfer value £­ 600 million won)/transfer value under Article 95 (1) of the Act.

2. The amount of special long-term holding deduction applicable to the assets falling under expensive houses;

X (transfer value £­ 600 million won)/transfer value under the provisions of Article 95 (2) of the Act.

(2) The provisions of Article 100 (2) of the Act shall apply mutatis mutandis to the calculation method of transfer value under the latter part of paragraph (1).

Common Provisions of the Income Tax Act

89-21 [Judgment on non-taxation of one house for one household with a special agreement for sale]

The determination of non-taxation on one house for one household under the provisions of Article 154 (1) of the Decree shall be based on the date of transfer.

Provided, That where one house for one household is destroyed by a special contract for sale before the date of transfer after the sales contract, it shall be based on the date of the sales contract.

C. Determination

Article 154 (1) of the former Enforcement Decree of the Income Tax Act provides that "one house for one household" as provided in Article 89 (3) of the former Enforcement Decree of the Income Tax Act refers to the case where one household owns one house in Korea as of the date of transfer, and Article 95 (3) of the former Income Tax Act and Article 160 (1) of the Enforcement Decree of the same Act provides that "one house for one household" of the above "one house for one household" shall be subject to special provisions of Article 95 (3) of the former Income Tax Act and Article 160 (1) of the Enforcement Decree of the same Act. Thus, in order to be subject to special provisions of Article 95 (3) of the former Income Tax Act and Article 160 (1) of the same Enforcement Decree of the same Act, a house for one household shall be established on the ground of the annexed land at the time of transfer to the same person. However, as in this case, the plaintiff has completed the registration of ownership transfer only on the basis of the needs of the purchaser at least 19.

On the other hand, the Plaintiff acquired the instant apartment house from the date following the removal of the instant apartment house and owned it until the time it completed the registration of ownership transfer under the name of Cho○○○ and Kim○○○, and the Defendant issued the instant disposition on the ground that the Plaintiff possessed another house at the time of transfer of the instant appurtenant land, as above, and did not constitute “one house for one household”. However, the instant house is merely land in the form of a site, and the Plaintiff’s ownership was finally extinguished due to removal of the instant apartment house before its acquisition. Therefore, it cannot be deemed that the Plaintiff actually possessed two houses at the time of the said transfer. If the instant house is removed under the instant special agreement, it cannot be deemed that the Plaintiff would have acquired the instant house from the date of the sale and purchase under the former Enforcement Decree only because it would be difficult to conclude that the ownership of the existing house would be removed by the sale and sale of the existing house, which would be a new house for the sake of equity and purpose under the Income Tax Act, in light of the fact that the ownership of the remaining appurtenant land was transferred to the first house before its sale and sale.

Therefore, the instant disposition that deemed otherwise excluded the application of Article 95(3) of the former Income Tax Act and Article 160(1) of the Enforcement Decree of the same Act to the transfer of the instant house and appurtenant land is unlawful.

3. Conclusion

Thus, the plaintiff's claim seeking the cancellation of the disposition of this case is reasonable, and it is decided as per Disposition by admitting it.