The case holding that, where a company under suspension among officetels construction is transferred to a business entity, it shall be deemed that it has been engaged in real estate sales business.

The case holding that real estate sales business shall be conducted in consideration of the circumstances where a business operator registered a real estate sales business, and more than 80% of officetels after obtaining a construction permit, and the company under suspension is to acquire and operate a company under suspension for tax reduction, etc. after being engaged in a business, such as receiving 7.4 billion won or more, and the transfer of a business entity to the company, and the size, size, etc. of the officetel building under construction.

Article 20 (1) 8 of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990), Article 36 subparagraph 3 of the Enforcement Decree of the Income Tax Act

[Plaintiff, Appellant] Plaintiff 1 and 1 other (Law Firm Doz., Counsel for plaintiff-appellant)

[Judgment of the court below]

Head of the tax office

Seoul High Court Decision 93Gu27583 delivered on August 16, 1994

The judgment below is reversed, and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

1. According to the reasoning of the judgment below, while the Plaintiff acquired and possessed the instant land on June 25, 1975, the court below decided that the Plaintiff’s initial acquisition of the company’s share in the management of the non-party limited liability company, including the Plaintiff, for the purpose of tax saving, was unlawful since it was difficult to view that the Plaintiff’s ownership was transferred to the company as part of the sale price, and that the Plaintiff did not take over the above company’s share in the management of the company’s business for non-party limited liability company, for the purpose of tax saving, after obtaining a construction permit on July 27, 1989, and entered into a construction contract with the non-party Large Forest Industry Co., Ltd. on September 4, 199, and the construction contract was commenced on October 23, 199.

2. Whether the income from the new construction and sale of real estate belongs to the business income under the Income Tax Act or is subject to the transfer income tax under the income tax Act shall be determined according to the ordinary social norms, considering whether the sale and purchase is for profit-making purposes, and the degree of continuity and repetition of business activities to the extent that it can be seen as business activities in light of the scale, frequency and mode of the sale and purchase (see, e.g., Supreme Court Decisions 93Nu2623, Apr. 15, 1994; 93Nu17522, Sept. 9, 194).

However, according to the records of this case, the plaintiff registered a business for real estate sales, sold officetels exceeding 80% after obtaining a building permit in advance, and acquired and operated the above company under suspension for tax saving, etc., and transferred a company to the above company. Thus, considering such circumstances and the shape, size, etc. of the officetel building where the plaintiff was under construction, the plaintiff shall be deemed to have been operating a real estate sales business. Even if the plaintiff transferred the land of this case and the buildings under completion on its ground due to the same circumstance as the decision of the court below, it is impossible to deny the business feasibility for the transfer of the above company.

Nevertheless, the lower court determined that the Plaintiff’s transfer of the instant land, etc. does not constitute real estate sales business on the grounds of its holding, and thus, the lower court erred by misapprehending the legal doctrine on the feasibility of construction business, and it is obvious that such illegality has affected the conclusion of the judgment.

3. Therefore, the judgment of the court below is reversed, and the case is remanded to the Seoul High Court. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-soo (Presiding Justice)