Article 1 of the Enforcement Rule of the Value-Added Tax Act (Scope of Business)

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

A. On December 27, 1995, the Plaintiff acquired KRW 1,820,00,000 from ○○○○-dong, ○○○-dong, 00,912 square meters (hereinafter “instant land”) located within the land transaction permission zone from ○○○○ to KRW 1,820,00,00. On April 22, 1999, the Plaintiff transferred KRW 5,400,000 to 2 other than ○○○○, and reported and paid KRW 431,748,306 of the capital gains tax on June 199.

B. On July 21, 2004, the Defendant deemed that the Plaintiff was engaged in real estate sales, and rendered the instant disposition imposing global income tax of KRW 1,297,845,270 on the Plaintiff in the year 199.

[Reasons for Recognition] 1-3, Gap evidence 2-1, Eul evidence 1-2, Eul evidence 4-1 and Eul evidence 2

2. Whether the disposition is lawful;

A. The plaintiff's assertion

After the acquisition of the instant land, the Plaintiff was unable to secure access roads and interfere with neighboring residents. Moreover, the Plaintiff himself/herself did not conduct real estate sales business only for selling to a third party due to lack of construction capacity in accordance with the permission. In a recent ten years, the Plaintiff acquired real estate at least once under Article 1 (1) of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 193, Apr. 3, 2001; hereinafter the same shall apply) and did not transfer the land more than twice, and thus, the Defendant’s disposition of this case, which imposed business income tax, other than transfer income tax, on the instant land transfer act, was unlawful.

(b) Related statutes;

○ Article 19 of the Income Tax Act

(1) Business income shall be the following incomes generated during the relevant year:

1. Above 11. (Omission)

12. Incomes accruing from real estate sales business determined by the Presidential Decree;

○ Scope of real estate trading under Article 34 of the Enforcement Decree of the Income Tax Act

For the purpose of Article 19 (1) 12 of the Act, the term “real estate sales business as determined by the Presidential Decree” means buildings, construction business (limited to the case of self-construction and sale of buildings), and real estate supply business under the Korean Standard Industrial Classification: Provided, That this shall not include the housing construction and sales business under

○ Scope of business under Article 1 of the Enforcement Rule of the Value-Added Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 193 on April 3, 2001)

(1) Where real estate is sold or real estate is acquired at least once during a taxable period of one taxable period and sold at least twice for the purpose of business by indicating the sale or purchase of real estate (including the sale by newly constructing a building) or the brokerage thereof for the purpose of business, it shall be deemed to be operated

○ Classification of categories of real estate sales business, etc. under General Rule 19-7 of Income Tax Act

(1) The scope of real estate sales business under Article 34 of the Decree shall be as follows:

1. Where real estate is sold or purchased at least once after acquiring and selling real estate in a taxation period of one tax under the Value-Added Tax Act for the purpose of business by indicating the sale or purchase of real estate (including the cases of newly constructing and selling a building) or its brokerage for business purposes;

2. Where a building and land under the Building Act being constructed for the purpose of sale by newly building commercial buildings, etc. on his own land are transferred to a third party;

3. Where land is developed and sold by dividing it into a residential site, industrial complex, commercial building, cemetery, etc. (including where a person who acquired the ownership pursuant to Article 14 of the Public Waters Reclamation Act transfers the reclaimed land acquired by dividing it);

(2) The development of graveyards and the establishment of a grave base and the collection of rent, etc. from the establisher of a grave shall constitute a real estate leasing business.

(3) Any business which conducts real estate appraisal services by means of sale of real estate, mortgage, lease, etc. shall be deemed a business service.

(4) Development of land in the classification of real estate trading means all activities that cause a reasonable and efficient increase in the utility value of the land by suspending, dividing, creating, and changing the specific land.

(c) Fact of recognition;

(1) The Plaintiff acquired 47,476 square meters over 26 times since 1981, and transferred 52,022 square meters over 55 times. The Plaintiff’s wife Kim ○, without any particular income, acquired 9,04 square meters over 10 times since 1981 and transferred 3,775 square meters over nine times.

The status of the acquisition and transfer of real estate by the Plaintiff and the Plaintiff wife is as shown in attached Form 2. In particular, from November 18, 1985 to November 26, 1993, the Plaintiff acquired ○○○○○○○○○○○○○○○○, 990 square meters on five occasions, and changed the land category into a part of the land, divided the land into a site, and transferred the land to ○○○○○○○, Inc. on November 30, 1995, and thereafter the apartment was constructed on the said land.

(2) On October 2, 1995, which was three months prior to the completion of the registration of ownership transfer for the instant land, the Plaintiff obtained permission from ○○○○ to use the land from ○○○○ to use the land for the purpose of warehouse site, and acquired the instant land on December 27, 1995, and divided a part of the instant land into ○○○○○-dong, ○○-Y, 2,645 square meters. On March 12, 1996, the Plaintiff registered a real estate rental business entity (no rental record until June 29, 201) for the purpose of carrying out a real estate rental business with the trade name called ○○○ Logistics, and obtained a warehouse building permit from ○○○○ on July 19, 196.

The Plaintiff started construction of a warehouse around June 9, 1997 and completed five Dongs and one Dong of water level of 7.56 square meters in a light steel-frame blade roof 330 square meters and one Dong of water level of 7.56 square meters. The Plaintiff underwent a completion inspection on July 7, 1997.

The ordinary construction cost of the above warehouse was 30,000 won, and there was no construction work related to facilities such as electricity, water supply, etc. for warehouse business. Construction materials were used miscellaneous goods to be used as a warehouse that cannot be used at all times as a warehouse. Construction cost of the light steel frame at the time was about 700,000 won and about 90,000 won for the construction cost of the light steel frame at the time could not be constructed for the purpose of warehouse.

On July 11, 1997, ○ Industrial Development Co., Ltd. ("○ Industrial Development") filed an application for apartment building permit for part of the instant land, and on July 16, 1997, the Plaintiff changed the land category of the instant land from forest to miscellaneous land, and combined the said divided 96-4 with 96-3.

On August 29, 1997, the Plaintiff divided the instant land into six pieces, including 96-3, 5, 6, 7, 8, 9, and 9, based on each Dong of warehouse. On September 1, 1997, the Plaintiff entered a divisional registration and made approval for land use to four corporations, other than ○○ Industrial Development, and on July 28, 1997, the ○○ Industrial Development was 96-7, and on September 23, 1997, the ○○ Construction (○○○ Construction) and the ○○ Construction (○○ Construction) were 96-5, 96-6 on September 23, 1997, and the ○○ Construction (○○ Construction) was 96-8 on September 26, 197 and the ○○ Construction (○○ Construction) on September 26, 1997, the ○○ Construction was ○ Construction Construction (○○ Construction) on September 3, 1997.

When the above construction company, which received apartment construction permit, failed to purchase the instant land, the Plaintiff, which operated ○○ Pac Trade (hereinafter “○○ Pac Trade”) and ○ Pac Trade Co., Ltd. (hereinafter “○ PacP”) on October 22, 1998, changed the name of ○ Pac Development on October 198, 198 to ○ Pac Trade ○ Pac ○ P ○ P ○ Pack ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 0, Oct. 19, 198, to 00 ○ 60 ○ 9, Oct. 22, 1998; 196 ○ 94, Oct. 22, 1998 ○ 9, 194, 196 ○ ○ 94,00 Pac.

The right, ○○, etc. acquiring the instant land shall be changed to the name of the two-lane owner on May 6, 199.

(3) The business plan submitted by the Plaintiff at the time of applying for changing the form and quality of a forest had been constructed as a warehouse with a increased demand for ○○ carpets. However, ○○ carpet was closed on March 20, 1995 and closed on April 4, 1996 without any specific business performance.

(4) The officially announced land price of this case was originally 32,100/m2 on June 30, 1995, and 293,000/m2 on June 28, 1996. However, upon the Plaintiff’s filing of an objection, ○○ City was adjusted to 72,900/m2 on June 30, 1995 after deliberation by the Land Appraisal Commission on September 24, 1996, and 200,000/m200/m2 on June 28, 1996, and the Plaintiff’s development gains of this case were calculated as 667,740,965. The officially announced land price was adjusted to 200,000/m2 on June 28, 1996.

[Based on recognition] Gap evidence 3, 4, 6, Eul evidence 2, 3, Eul evidence 4-1 to 3, Eul evidence 5-8, Eul evidence 9-1, 2, Eul evidence 10, 11-2, Eul evidence 12-16, Eul evidence 17, 17, 18, 20-1 to 20-3, Eul evidence 23, and the purport of the whole pleadings and arguments

D. Determination

Whether income from the sale and purchase of a real estate belongs to business income under the Income Tax Act or is subject to capital gains tax should be determined by considering whether the sale and purchase is aimed at profit, and whether the sale and purchase is continuous and repeated to the extent that it can be seen as business activities in light of its size, frequency, appearance, etc. In addition, Article 1(1) of the former Enforcement Rule of the Value-Added Tax Act is merely an exceptional provision that can be seen as real estate sale and purchase business, and even if the sale and purchase falls short of the number of sales under the above provision, the business feasibility cannot be denied if

However, after acquiring the ownership of the land of this case, the Plaintiff developed the land through the division, combination, redivision, and change of the form and quality, and as a result, transferred the land of this case at a high price due to the increase of the land price, and the newly constructed warehouse is not suitable for warehouse business, real estate rental business, and the new warehouse was not leased or used after the new construction of warehouse. Since the land of this case was converted into land category from forest land to miscellaneous land, the Plaintiff filed an application for apartment building permit on the ground that the land of this case was converted into land category after the new construction of warehouse, and the construction of apartment, such as the removal of warehouse and the construction of apartment, was done for the purpose of changing the quality of the land of this case to miscellaneous land from forest land for apartment construction rather than for warehouse business and real estate rental business. In light of the Plaintiff’s overall purpose of acquiring the land of this case from November 18, 1985 to November 26, 193, the Plaintiff’s transfer of land and its land category to 000,70 square meters and 7.

Therefore, on the premise that the Plaintiff’s act of transferring the instant land does not constitute real estate sales, the Plaintiff’s assertion that the Defendant’s disposition of this case was unlawful by imposing business income tax, not capital gains tax, on the instant land transfer cannot

3. Conclusion

Thus, the defendant's disposition of this case is legitimate, and thus, the plaintiff's claim seeking its revocation is rejected as it is without merit.

[Seoul High Court Decision 2006Nu21797, May 03, 2007]

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

A. The second 14-17 of the former Enforcement Rule of the Value-Added Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 193, Apr. 3, 2001; hereinafter the same shall apply) was not "," and the second 10 of the 14-17 of the 199-17 of the 199, acquired real estate at least once during the last 10-year period, and did not have been transferred at least twice, and the real estate was acquired at least once during the last 10-year period from 1994 to 2004, and it did not constitute a case where it is deemed that a real estate sales business under Article 1 (1) of the former Enforcement Rule of the Added Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 193, Apr. 3, 2001; hereinafter the same shall apply) was not deemed to have been operated."

(b)Correction to the extent that “90,000 won” in parallel 3(20) is generally required to be sent to the extent of KRW 900,000;

C. Subsequent to the 5th 20th 20th e.g., “shall not be unlawful” (see, e.g., Supreme Court Decisions 95Nu92, Nov. 7, 1995; 96Nu1081, Feb. 25, 1997; 96Nu1857, Apr. 25, 1997; 97Nu12785, Feb. 10, 198).

2. If so, the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.