[양도소득세부과처분취소][공2000.12.15.(120),2455]
Whether the transfer of assets by a compromise contract does not constitute the transfer of assets at a cost subject to the transfer income tax if special circumstances, which cannot be deemed the transfer of assets at a cost, are demonstrated (affirmative)
In a compromise contract where the parties agree to terminate a dispute between the parties by mutual concession, the part of mutual concession between the parties is approved to inflict losses on each other, and thus a compromise contract is concluded for the other party's payment. Therefore, in principle, the transfer of assets under a compromise contract may be subject to capital gains tax as a onerous transfer provided for in the main sentence of Article 4 (3) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994). However, in light of the substance over form principle, if special circumstances prove that the transfer of assets under a compromise contract is merely a mere restoration of title or is not a gratuitous transfer in light of the substantial legal relations that form the basis of a compromise, such transfer of assets cannot be deemed as a transfer of assets, which is subject to capital gains tax.
Article 731 of the Civil Act and Article 4 (3) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) (see current Article 88 (1))
Plaintiff (Attorney Park Jong-young, Counsel for the plaintiff-appellant)
Head of Guro Tax Office
Seoul High Court Decision 97Gu10736 delivered on November 13, 1997
The appeal is dismissed. The costs of appeal are assessed against the plaintiff.
We examine the grounds of appeal.
1. In a settlement contract under which the parties agree to terminate a dispute between the parties by mutual concession (Article 731 of the Civil Act), the part of mutual concession between the parties is approved to inflict losses on each other. As such, a settlement contract shall be a compensatory contract. Therefore, the transfer of assets under a settlement contract may, in principle, be subject to capital gains tax as an onerous transfer under the main sentence of Article 4(3) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994). However, in light of the substance over form principle, the transfer of assets under a settlement contract is merely a mere restoration of title or is merely a transfer of assets in light of the substantial legal relationship that forms the basis of a settlement, if special circumstances, such as where it is proved that a transfer of assets cannot be regarded as a gratuitous transfer, it shall not be deemed that the transfer of assets constitutes a transfer of assets subject to capital gains tax.
2. According to the reasoning of the judgment below, the court below acknowledged that the non-party filed a lawsuit against the plaintiff for the execution of the procedure for the cancellation registration of ownership transfer by claiming ownership of the land of this case. The plaintiff's claim against the above non-party is asserted in response. On March 24, 1994, the plaintiff, while the above lawsuit is pending, a settlement was formed in the lawsuit that takes the procedure for the transfer registration of ownership based on an agreement on the same day with respect to one-half share of the land of this case to the non-party, and the non-party shall waive the remaining claims. Accordingly, on June 23, 1995, the transfer registration of ownership based on the above agreement is completed on the part of the non-party as to one-half share of the land of this case on the ground of the above agreement, and on the transfer of assets through a settlement contract, the transfer of the above share of this case's land of this case shall be deemed to constitute a commercial transfer unless there are special circumstances, and there is no error in the misapprehension of legal principles as to the transfer registration of ownership of this case's.
3. Therefore, the appeal is dismissed and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.
Justices Lee Han-gu (Presiding Justice)