Article 41(1)3 and (2) of the Corporate Tax Act and Article 72(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20720, Feb. 29, 2008) provide that the acquisition value of the assets acquired through investment in kind in the account book shall be the value of the investment or the value of succession, but if the value exceeds the market value, the excess amount shall be excluded.

The court below acknowledged the facts as stated in its reasoning based on its adopted evidence. Since the value calculated in the account book as acquisition value of the land of this case invested by the plaintiff from the members of the reconstruction association is within the scope of market price under the Corporate Tax Act, it is legitimate to report corporate tax for the business year 2004 after deducting the value equivalent to the share of land in general sale from the above book value and the construction cost, etc. in relation to the sale price in general from the above book value in relation to the sale in lots in general from the above book value in relation to the sale in lots, and further, whether the plaintiff suffered income in relation to the sale in lots from the reconstruction association in general shall be determined by comparing not only the sale price in general but also the amount of income calculated including the value of the apartment unit of the association members, construction cost, land acquisition cost, additional contributions, etc. The court below rejected the plaintiff's assertion that the plaintiff's disposition of this case is in violation of the principle of substantial taxation against the plaintiff's plaintiff's claim for correction on the ground that even if the plaintiff seems to have no income related to the general sale in lots.

In light of the above provisions and records, it is reasonable to view that the Plaintiff derived income equivalent to the amount obtained by deducting the book value and construction cost of the share in the land for sale in general from the sale price in relation to the sale in lots, etc., and that the income was distributed to the Plaintiff by the Plaintiff through the process of selling the apartment in excess of his/her investment value. Therefore, it is somewhat inappropriate for the lower court to have explained to the effect that the Plaintiff should determine whether there was a substantial profit in relation to the sale in lots in general to the Plaintiff by comparing the total amount of income including the value of the apartment house for the association members with the total amount of expenses incurred

The court below did not err by misapprehending the principle of substantial taxation or the legal principles as to the income amount in the reconstruction association, which is alleged in the ground of appeal.

Therefore, the appeal is dismissed, and the 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 Yang Chang-soo (Presiding Justice)