Whether the acquisition value of the donated land falls under the necessary expenses to be deducted from the transfer value as improvement expenses where part of the land is donated to a local government and the remaining land is transferred after obtaining permission (affirmative)

Article 45 (1) 2 of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990) provides that expenses for equipment and improvement shall be deducted as necessary expenses, unless there are other circumstances, even if the contents or scope of the contents or scope of deduction of necessary expenses are delegated to the Enforcement Decree and the standard market price is based on the standard market price. The above equipment and improvement expenses refer to the expenses that significantly increase the objective value of fixed assets to the extent that it may affect the determination of the standard market price of the land or building. Thus, if part of the land is donated to the local government due to the implementation of the permission for changing the form and quality of the land and the land was transferred to the purchaser after obtaining the permission, the donation constitutes procedures necessary for remarkably increasing the objective value of the land, and the acquisition value of the donated land constitutes necessary expenses to be deducted from the transfer value of the land as prescribed in Article 45 (1) 2 of the Income Tax Act.

Article 45 (1) 2 of the former Income Tax Act (Amended by Act No. 4281, Dec. 31, 1990; see current Article 97 (1) 2); Article 94 (2) of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 13194, Dec. 31, 1990; see current Article 163 (3)) (see current Article 163 (3))

Supreme Court en banc Decision 90Nu9360 Decided October 22, 1991 (Gong1991, 2855) Supreme Court Decision 91Nu7149 Decided April 14, 1992 (Gong1992, 1631)

[Judgment of the court below]

The Director of the Pacific District Office

Seoul High Court Decision 95Gu27242 delivered on July 24, 1996

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

The Plaintiff’s attorney’s ground of appeal is examined.

According to the reasoning of the judgment below, on October 28, 1983, the plaintiff acquired and owned 1,619.2 square meters prior to Gangnam-gu Seoul ( Address 1 omitted) on December 11, 1990, and obtained permission for changing the form and quality of the previous land from the head of Gangnam-gu with the burden of selling 324 square meters to Seoul Special Metropolitan City pursuant to Article 12 of the Guidelines for Permission for changing the form and quality of the land, which was enforced at the time of the above land, on December 11, 1990. The court below determined that on December 20, 1990, the previous land was the amount of 1,294.8 square meters prior to ( Address 2 omitted) and 324.4 square meters prior to the acquisition of land (hereinafter address 3 omitted) and the transfer value of the previous land was 70 percent of the total value of the land, which was paid by the plaintiff for the purpose of calculating the transfer value of the land in its name and 20.

Article 45 (1) 2 of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990) provides that expenses for equipment and improvement shall be deducted as necessary expenses, unless there are other circumstances (see Supreme Court en banc Decision 90Nu9360 of Oct. 22, 1991) with respect to the cost for equipment and improvement, even though the contents or scope of the deduction on necessary expenses are not delegated to the Enforcement Decree, and it is based on the standard market price, barring any other circumstances (see Supreme Court Decision 90Nu9360 of Apr. 14, 1992).

However, as determined by the court below, if the plaintiff donated part of the land to Seoul Special Metropolitan City due to the performance of the burden on the permission to change the form and quality of the land of this case, this constitutes a procedure necessary for remarkably increasing the objective value of the land of this case, and thus the acquisition value of the donated land is the improvement cost under Article 45 (1) 2 of the Income Tax Act, which shall be deducted from the transfer value of the land of

Nevertheless, the court below determined that the acquisition value of the donated land does not constitute necessary expenses that shall be deducted from the transfer value of the land in this case. The court below erred in the misapprehension of legal principles as to necessary expenses that shall be deducted from the transfer value, which affected the conclusion of the judgment. The grounds for appeal pointing this out are with merit.

Therefore, without examining other grounds of appeal, we reverse the judgment below and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Song Jin-hun (Presiding Justice)