Examination-transfer-2018-0051 (Law No. 26, 2018)

The housing area cannot be taxed because it is less than the portion other than the housing area, and the retroactive appraisal value of inherited property can be seen as the market value at the time of inheritance.

It is difficult to see that the commercial building has been restored to a house, and it is possible to recognize the appraised value of inherited property as the acquisition value at the time of transfer.

Article 49 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the scope of housing for one household under Article 154 of the Enforcement Decree of the Income Tax

2018Guhap23375 Revocation of Disposition of Imposing capital gains tax

Na○

○ Head of tax office

December 20, 2018

on October 31, 2019

1. On February 1, 2018, the Defendant revoked the part exceeding KRW 282,637,080 of the rectification and disposition of KRW 347,273,580 for the Plaintiff in the capital gains tax for the year 2015.

2. The plaintiff's primary claim is dismissed.

3. A quarter of the costs of lawsuit shall be borne by the Plaintiff, and the remainder shall be borne by the Defendant.

1. The primary purport of the claim

The Defendant’s disposition of correction and notification of KRW 347,273,580 for the Plaintiff on February 1, 2018 shall be revoked.

2. Preliminary purport of claim

Paragraph (1) shall apply.

1. Details of the disposition;

A. On August 13, 1983, the Plaintiff acquired two houses (104.13 square meters on a first floor, 204.85 square meters on a second floor, 57.85 square meters on a second floor, and 132.17 square meters on a single-story shop in reinforced concrete structure, 132.17 square meters on a single-story shop (hereinafter collectively referred to as “the instant real estate”). On September 3, 2015, the Plaintiff transferred the instant real estate to AAAA Co., Ltd. (hereinafter referred to as “AAAA”) for inheritance.

B. On November 20, 2015, the Plaintiff reported and paid KRW 45,018,639 of the capital gains tax calculated by dividing the instant real estate into one house expensive house and calculated as one house expensive house, on the following grounds: (a) the housing area (a total of 1 and 2 stories of the instant building) among the instant real estate is larger than the part other than the area (a store 132.17 square meters).

C. From September 4, 2017 to December 21, 2017, the director of ○○ Regional Tax Office confirmed that the first floor of the instant building is operated as a restaurant and excluded from the housing area, and that the real estate of this case is more than the part other than the housing area (57.85 square meters on the second floor of the instant building and 104.13 square meters on the 1st floor and 132.17 square meters on the 1st floor of the instant building and 270.48 square meters on the aggregate including an unauthorized building).

D. On February 1, 2018, the Defendant denied the Plaintiff’s non-taxation exemption on one house for one household with respect to the area other than the housing area, and issued the instant disposition to correct and notify KRW 347,273,586 of the transfer income tax.

E. On April 17, 2018, the Plaintiff appealed to the National Tax Service, but was dismissed on July 26, 2018.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, 7, Eul evidence 1 to 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Inasmuch as the first floor of the instant building was restored to a house after closure and removal of restaurant business, the instant real estate is deemed as a house with a total area larger than the part other than the housing area, and thus, is subject to non-taxation and reduction of one house for one household. The instant disposition, which was conducted by excluding the instant real estate as non-taxation, is unlawful. Accordingly, the revocation of the instant disposition is

2) Even if the real estate area of this case’s real estate area is smaller than the area other than the housing area, the transfer income tax of this case’s real estate calculated by deeming the appraised value assessed as of the date of commencing the inheritance as the actual transaction value and recognizing it as the acquisition value is KRW 282,637,080, which is the real estate value. Therefore, the revocation of the part exceeding the above amount among the disposition of this case is

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Whether the first floor of the instant building falls under a house and whether the entire real estate of this case can be seen as a house

A) Relevant legal principles, etc.

Article 89(1)3 (a) of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016; hereinafter referred to as the “Income Tax Act”) provides that one of non-taxable capital gains is “one house for one household, which meets the requirements prescribed by Presidential Decree (excluding expensive houses the value of which exceeds the standard prescribed by Presidential Decree), and the appurtenant land, shall include “income accruing from a transfer of land within the area calculated by multiplying the area of the building by the rate prescribed by Presidential Decree by the area of the building on which the building is fixed,” and Article 154(3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27829, Feb. 3, 2017; hereinafter referred to as “Enforcement Decree”) provides that if a building is combined with a house and a building other than a house exists, the entire area of the house shall not be deemed a house if the total area of the building is smaller than or equal to the area other than a house.

Meanwhile, in light of the principle of substantial taxation, whether a building constitutes a house under the Income Tax Act ought to be determined by whether the actual purpose of use is a building actually offered for residence, regardless of the usage classification of a building and injury (see, e.g., Supreme Court Decisions 92Nu7023, Jul. 24, 1992; 2004Du14960, Apr. 28, 2005).

B) the facts of recognition

(1) On January 25, 1984, the Plaintiff was a business proprietor operating a building leasing business (self-owned land) with his place of business located in the instant real estate, and closed the business on August 31, 2015.

(2) The current status of restaurants operating in the instant real estate is as follows, and the total area of these restaurants is 270.62 square meters.

(3) On December 24, 2001, 201, the largest △△△△△ opened a restaurant with the name of “△△ House” on the first floor of the instant building, and closed the restaurant on August 26, 2015, and delivered the said building to the Plaintiff on August 31, 2015.

(4) After concluding a sales contract with AA for the instant real estate, the Plaintiff removed a part of unauthorized buildings without permission in order to pressure the △ House lessee to order the building. Accordingly, the kitchen outer wall of the instant building ceases to exist, causing interference with restaurant business.

(5) From 2007 to 2009, the Plaintiff calculated the instant real estate as the housing area of 57.85 square meters and the building area of 236.23 square meters. From 2010 to 2014, the Plaintiff calculated the housing area of 57.85 square meters and the building area of 322.25 square meters, and calculated the housing area of 57.85 square meters and the building area of 2015 as the housing area of 57.85 square meters in 2015 and paid each property tax.

(6) On April 22, 2015, the Plaintiff agreed to sell the instant real estate to AA to the effect that the Plaintiff is responsible for, and fulfilled, the duty of explanation and consent to the building permit.

(7) On September 3, 2015, AA removed buildings on September 8, 2015, after receiving the instant real estate name and completing the registration of ownership transfer.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 2, 3, 6, 7, 8, Eul evidence Nos. 2-11 and the purport of the whole pleadings

C) Specific determination

In light of the following circumstances that can be seen by the above facts, ① the first floor of the building of this case was used as a commercial building which is not a house for at least 14 years, ② the Plaintiff paid property tax on the premise that the first floor of the building of this case constitutes a business facility, ③ it is difficult to view that the structure, function or facility of the first floor of the building of this case, such as the loss of kitchen outer walls at the time of the transfer of the real estate of this case, etc., was adequate for residential purposes. ④ Since AA purchased the real estate of this case to build a new building, the building of this case was planned to be removed, and the Plaintiff also knew, the first floor of this case cannot be deemed a house because the actual usage of the building of this case is not actually used for residential purposes.

The Plaintiff asserted that the first floor of the instant building was restored to a house on August 26, 2015, and that it should be deemed as a house at the time of transfer, and that it was ordered on September 3, 2015. According to the witness LA’s statement, the Plaintiff agreed to restore the present condition of the instant building to a house at the time of the sale and purchase contract with AA, and that the Plaintiff was decided to do so. However, in light of the fact that the sales and sale contract (Evidence A No. 2) does not stipulate that the Plaintiff is responsible for the duty of surrender and that there was only the entry that the Plaintiff agrees to the construction permit, and that there was no entry that the building was scheduled to be removed, it is difficult to view that the first floor of the instant building was restored to a house at the time of transfer, and it is difficult to recognize it differently only with the entries in the evidence

Ultimately, the real estate area of this case is smaller than the area other than the housing area, and the area other than the housing area cannot be subject to non-taxation. The Plaintiff’s assertion on this part is without merit.

2) Whether the appraisal value can be recognized as acquisition value

A) Since inherited property cannot have agreed between the parties as the actual transaction value, the Income Tax Act specifically provides that the value appraised under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”) as of the date of commencing an inheritance or of donation shall be considered as the actual transaction value (Article 97(1) of the Income Tax Act and Article 163(9) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act). Meanwhile, Article 60(1) and (2) of the Inheritance Tax Act provides that the value of the property on which the inheritance tax or gift tax is levied shall be based on the “market price as of the date of commencing an inheritance or of donation.” Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act provides that “The market price shall be deemed as normally established when transactions are freely conducted between many and unspecified persons, and the appraised value shall be determined as the average value (Article 49(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act)

(B) Meanwhile, in imposing capital gains tax on the transfer of inherited property, even if the tax authority assessed the acquisition value of the pertinent property as a publicly assessed individual land price on the ground that it is difficult to assess the market price at the time of the inheritance of the pertinent property, it should determine whether the amount of the said taxation exceeds the reasonable tax amount after calculating gains on transfer and the tax amount on the basis of the market price when the market price at the time of the inheritance of the relevant property is proven by the time of closing argument in the lawsuit seeking revocation of the said taxation. The "market price" means, in principle, an objective exchange price formed through normal transactions, but this is a concept that includes the value assessed in an objective and reasonable manner, so if there is no exchange price through transactions, the appraisal price at a reliable appraisal institution can be seen as the "market price," and even if the value is not changed by retroactive appraisal (see, e.g., Supreme Court Decisions 204Du2356, Sept. 30, 200; 2010Du8751, Sept. 30, 2019).

C) According to the court’s appraisal commission with respect to ○○○○, the real estate price of this case as of August 13, 1983, which was the commencement date of inheritance, is known to the fact that there was 1,197,707,400 prices of the real estate as of August 13, 1983. In full view of the following: (a) the appraisal value of this case as of August 13, 1983, is assessed by objective and reasonable methods taking into account the pertinent comparative standard and considering the location, shape, environment, and use of the pertinent real estate; and (b) the objective exchange price of this case’s real estate can be deemed as the market price reflecting the adequate exchange price at the time of inheritance; and (c) the instant disposition

Therefore, the Plaintiff’s conjunctive claim is reasonable, and the portion exceeding KRW 282,637,080, which is the tax amount calculated by recognizing the above appraisal value at the market price at the time of acquisition of the disposition of this case (the Defendant did not dispute the above calculation amount) should be revoked as unlawful.

3. Conclusion

The plaintiff's primary claim is dismissed as without merit, and the conjunctive claim is accepted with merit, and it is so decided as per Disposition.