Article 176-2 of the Enforcement Decree of Income Tax Act

2. The costs of lawsuit shall be borne by the Plaintiff.

A. On April 23, 2002, the Plaintiff acquired and owned a commercial building No. 000-0, 000 (hereinafter “instant commercial building”) located in Kimpo-si, Opo-si, Opo-si, Opo-si, 00-0, 000, and transferred the commercial building by voluntary auction on February 3, 2010.

B. On April 26, 2010, the Plaintiff asserted that the Plaintiff acquired the instant commercial building at KRW 140 million and transferred it at KRW 12 million to the Defendant, and that the Plaintiff made a preliminary return on the tax base of the transfer income tax to the effect that the transfer margin is KRW 38 million and the transfer margin is KRW 0 million.

C. At the time of the acquisition of the instant commercial building, the Defendant: (a) applied the acquisition price converted under Article 176-2(2)2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010; hereinafter the Enforcement Decree of the Income Tax Act refers to the Enforcement Decree; hereinafter referred to as “converted price”) to the acquisition price on the grounds that it cannot be confirmed the actual transaction price between the Plaintiff and the transferor at the time of the acquisition of the instant commercial building; (b) estimated the conversion price of KRW 52,392,340; (c) revised the transfer price to KRW 1,100,000,000,000, which is the voluntary auction sale price; and (d) revised the transfer price to the Plaintiff on February 1, 2011, including KRW 4,624,320,000 for capital gains tax for the year 205,745,303,79.

D. On April 6, 2011, the Plaintiff appealed and filed an appeal with the Tax Tribunal on April 6, 201, but the appeal was dismissed on June 17, 2011.

[Ground of recognition] Facts without dispute, Gap evidence 1, 4, 7, 8, 2-1, 2, Eul evidence 1, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

① The Defendant calculated gains on transfer by applying the actual transaction value to the transfer value of the instant commercial building and the conversion value based on the standard market price to the acquisition value, which is contrary to the principle of the same standard under Article 100(1) of the Income Tax Act (the Plaintiff asserts that the transfer value and acquisition value should be calculated by applying each standard market price to the transfer value and acquisition value)

② As above, when the Defendant’s application of the converted value to the acquisition value is impossible to verify the actual transaction value, it would go against Article 114(7) of the former Income Tax Act (amended by Act No. 10408, Dec. 27, 2010; hereinafter “Income Tax Act”) and Article 176-2(3) of the Enforcement Decree of the same Act, which provides that the application in the order of the transaction example, appraisal value, conversion value, and standard market price shall be made.

③ Since the Defendant calculated the gains from transfer unfairly excessive and did not intentionally under-reported the Plaintiff, the imposition of additional tax on the grounds of under-reported return is unreasonable.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Whether the same standard is violated

Article 100 (1) of the Income Tax Act provides that the transfer value shall be calculated based on the same transaction example value when the transfer value is calculated, and the acquisition value shall also be calculated based on the standard market value when the transfer value is calculated. In applying the above principle, not only the actual transaction value at the time of transfer of the asset (or acquisition), but also the transfer value at the time of transfer (or the case where the transaction example or appraisal value is applied pursuant to Article 114 (7) of the Income Tax Act) shall be included in the transfer value, and the sale value at the time of transfer shall not be calculated according to the order of Article 114 (7) of the Enforcement Decree of the Income Tax Act. (2) The sale value at the time of transfer shall not be determined based on the order of Article 17 (1) of the Income Tax Act, and the sale value at the time of transfer shall not be determined based on the standard market value at the time of transfer.

(2) Whether the conversion value is illegal

The plaintiff asserts that prior to applying the conversion value to the acquisition value of the commercial building of this case, the appraisal value shall be applied, and based on the appraisal value, the evidence No. 5-1 and No. 2 (each appraisal report) is cited as the basis of the appraisal value. The appraisal value applicable to the following cases, the transfer value, or the acquisition value,

Pursuant to Article 176-2 (3) 2 of the Decree of the Administration and Home Affairs, one appraisal corporation has appraised the assets of the current year within three months before and after the date of transfer or acquisition respectively. < Amended by Presidential Decree No. 17648, Apr. 5, 2006; Presidential Decree No. 17475, Apr. 23, 2002; Presidential Decree No. 17870, Apr. 23, 2002; Presidential Decree No. 17475, Apr. 23, 2002; Presidential Decree No. 17475, Apr. 2, 2006; Presidential Decree No. 17870, Apr. 5, 2006; Presidential Decree No. 17870, Apr. 2, 2006>

(3) Whether the imposition of penalty tax for underreporting is illegal

Article 47-3(1) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011) provides that a penalty tax shall be imposed for underreporting if the tax base reported by a taxpayer falls short of the tax base to be reported under the tax law. As seen earlier, it is reasonable to deem that the Plaintiff underreporting the tax base unless the Plaintiff’s assertion that the Defendant unjustly excessive calculation of gains on transfer is justifiable. The taxpayer’s intentional intent and negligence in imposing penalty tax under the tax law is not considered (see, e.g., Supreme Court Decision 2002Du10643, Feb. 26, 2004). Thus, the Plaintiff’s assertion on this issue is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.