Written Internet Visit Counseling Team-1753 ( December 27, 2006)

Income;

The maintenance and management expenses, etc. of the business assets directly used for the purpose of gaining the relevant business income shall be those that may be included in the necessary expenses, or those incurred by the acquisition and management of assets not related to the business affairs shall be included in the necessary expenses.

1. The amount to be included in the necessary expenses in the calculation of the business income, etc. shall be the sum of the expenses corresponding to the total amount of income during the relevant business year which is generally accepted. As such, the maintenance and management expenses, etc. for business assets directly used to obtain the relevant business income may be included in the necessary expenses, or the expenses incurred in the acquisition and management of assets unrelated to the business, which are not related to the business, shall not be included in the necessary expenses.

Article 27 (Calculation of Necessary Expenses)

1. A summary of the contents of inquiry;

○ Questions

The head of a hospital operating a private hospital purchases a car using lease for commuting to and from work and processes the cost;

The purpose of supporting a vehicle (A) which is insufficient for the president to be used by the director, and the car (B) additionally purchased to be used for commuting to and from the hospital staff and business travel, whether it is possible to process the cost even if it is purchased using a lease.

2. Materials on the contents of questioning;

(a) related tax laws and regulations (law, enforcement decree, enforcement rule, basic rules);

Article 27 of the Income Tax Act (Calculation of Necessary Expenses)

(1) In calculating real estate rental income, business income, temporary property income, other income, or forest income, the amount to be included in necessary expenses shall be the sum of expenses corresponding to the total amount of income in the relevant year and generally accepted expenses.

(2) If the expenses corresponding to the gross amount of incomes prior to the current year are not appropriated as the necessary expenses before the current year, they shall be considered the necessary expenses.

(3) Matters necessary for calculation of necessary expenses shall be prescribed by Presidential Decree.

Article 55 of the Enforcement Decree of the Income Tax Act (Calculation of Necessary Expenses for Rental Income)

(1) Necessary expenses corresponding to the total amount of income from real estate rental and business income for each year shall be as follows:

7. Expenses for the business property;

(a) Repair expenses for maintaining the business property (including part of the idle facilities attached to the relevant business);

(b) Management expenses and maintenance expenses;

(c)rents for the business property;

27.Expenses similar to those as referred to in subparagraphs 1 through 26, which are corresponding to the total amount of the incomes concerned (amended on December 31, 97).

○ Article 33 (Non-Inclusion of Necessary Expenses)

(1) Of the amounts paid or to be paid by a resident in the current year, those under the following subparagraphs shall not be included in necessary expenses in the calculation of real estate rental income, business income, temporary property income, other income, or forest income:

5. Expenses for such domestic affairs as determined by the Presidential Decree, and related expenses;

13. The amount, out of the expenses disbursed in each year, deemed not directly related to the business under the conditions as prescribed by the Presidential Decree.

Article 61 of the Enforcement Decree of the Income Tax Act (Expenses related to household affairs)

(1) The term “expenses for such domestic affairs as determined by the Presidential Decree” in Article 33 (1) 5 of the Act means those falling under one of the following subparagraphs:

1. Expenses confirmed as used by the businessman in connection with the domestic affairs. In this case, the expenses related to the houses falling under the proviso of Article 98 (2) 2 (proviso) shall be deemed expenses paid in connection with the domestic affairs; and

Article 78 of the Enforcement Decree of the Income Tax Act (Expenditure not related to the business)

The term “amount deemed not directly related to the business” in Article 33 (1) 13 of the Act means the amount falling under any of the following subparagraphs:

1. Maintenance expenses incurred in acquisition and management of assets not related to the business by a business operator, and necessary expenses related thereto;

2. Maintenance expenses, user fees and other related expenses for land, buildings, etc. mainly used by another person (excluding employees) instead of directly using them for the relevant business;

3. Interest paid on the amount borrowed by a business operator to acquire assets not related to such business.

○ General Rule 33-3: Calculation of necessary expenses for common expenses related to the projects and household affairs

With respect to the amounts paid in common with the business and household affairs, the calculation of necessary expenses related to the business shall be as follows:

1. In case where the paid amount is ordinarily required for performing duties in gaining real estate rental income or business income, and where the portions required therefor are clearly distinguishable, the relevant amount shall be included in the necessary expenses, limited to such divided amount;

2. If it is not clear that the business is relevant or it is deemed mainly related to domestic affairs, it shall not be counted as necessary expenses;

(b) Established (established rules, interpretation cases, review, adjudication, judicial precedents, etc.);

○ Document 1 Team-1308, October 28, 2005

【Reasoning】

Where a real estate rental business operator purchases a vehicle by leasing, whether the lease fee can be included in the necessary expenses for the real estate rental income, and whether the rent for the driver of the relevant vehicle can be processed.

【Correspondence】

1. In calculating business income, etc., the amount to be included in necessary expenses is the sum of expenses corresponding to the total amount of income in the current year, which is generally accepted, and thus, the maintenance and management expenses, etc. of the business assets directly used by a real estate rental business operator to obtain the relevant real estate rental income, may be included in necessary expenses, or any expenses incurred by acquiring and managing assets not related to the business, shall not be included

2. Where the amount paid in connection with the relevant assets, such as in the case of return inquiries, is related jointly to the business and domestic affairs, such assets shall be ordinarily required for the performance of duties, and where the necessary parts are clearly distinguishable, the relevant amount may be included in the necessary expenses, but where it is not clear that they are related to the business or it is deemed that they are mainly related to domestic affairs,

○ Document 1 Team-664, 2004.17

【Reasoning】

Where a business operator who owns real estate for rent in various places, such as Seoul, a river, a river, or a garment, and acquires a car to manage the relevant real estate;

(1) Whether a passenger car of a real estate rental business operator constitutes a business asset

(2) Whether the salary of the employee and the cost of operating the vehicle are deemed to be the necessary expenses in the event that the employee drives a car of the inquiry 1.

(3) Whether, in the event that a car of a real estate rental business operator and a car of an employee are used together, the cost incurred in maintaining each car is deemed necessary expenses.

【Correspondence】

The maintenance and management expenses, etc. for fixed business used directly by the real estate rental businessman to obtain the relevant real estate rental income, may be included in the necessary expenses, but where the relevant property is used for both business and domestic affairs, the calculation of necessary expenses related to the real estate rental business shall be based on the General Rules 33-3 of the Income Tax Act, and whether the maintenance and management expenses, etc. for the motor vehicle used by the relevant real estate rental businessman may be included in the necessary expenses in calculating the relevant real estate rental income amount, shall be determined comprehensively in light of the scale and form of the relevant real estate rental business

○ High Court Decision 2005Da1298, 1206.05.12

Since the lease fee for a car used for commuting is used for business purposes, the disposition denying necessary expenses is unreasonable for a car called an external car.