Whether the acquisition value of the immovables acquired by gift is the standard market price for this disposition

The Enforcement Decree, which considers the acquisition value of real estate acquired by donation as the standard market price at the time of inheritance, cannot be regarded as an invalid provision in violation of the provisions of the mother law.

Article 97 (Calculation of Necessary Expenses for Transfer Income)

Article 163 of the Enforcement Decree of the Income Tax Act

1. The plaintiff's appeal is dismissed.

2. The costs of lawsuit after the appeal shall be borne by the plaintiff.

The decision of the first instance court shall be revoked. On October 7, 2003, the part that the Defendant refused to rectify the tax base of the capital gains tax upon the Plaintiff to KRW 363,163,463 among the disposition rejecting an application for rectification of capital gains tax rendered by the Defendant against the Plaintiff shall be revoked. (The Plaintiff, while seeking the revocation of the entire rejection disposition of the original request for correction, has reduced the purport of the claim by seeking only cancellation of the part refusing to correct

1. Details of the disposition;

A. On August 4, 1998, the Plaintiff was donated to ○○○○○○○○○○○○○○○○○○, a non-resident with no domestic address, and was transferred to ○○○○○○○○○○○○○○○○○○○, ○○○○○, ○○○○, ○○○○○, ○○○, ○○○, ○○○, ○○○, ○○○, ○○, ○○, ○○, ○○, ○○○, 174.96 square meters (hereinafter referred to as “instant real property”) on August 20, 203

B. On August 7, 2003, the Plaintiff filed a preliminary return of the tax base of capital gains tax on which the said actual transaction value is the transfer value, and reported the acquisition value to be deducted as necessary expenses as the tax base calculated as the assessed amount under Article 60 of the Inheritance Tax and Gift Tax Act as of the date of donation under Article 163(9) of the Enforcement Decree of the Income Tax Act, but on August 18, 2003, the Plaintiff filed a claim to the Defendant to rectify the said acquisition value as the tax base 361,61,624 won calculated by the conversion value under Article 97(1)1(c) of the Income Tax Act.

C. However, on October 7, 2003, the defendant sent a reply to the plaintiff on the ground that "in case of expensive houses with the principle of calculating transfer margin as the actual transaction price, the appraised value under the Inheritance Tax and Gift Tax Act at the time of receiving a donation pursuant to Article 163 (9) of the Enforcement Decree of the Income Tax Act shall be deemed as the actual transaction price at the time of acquisition."

[Reasons for Recognition] Evidence No. 1-2, Evidence No. 2-2, Evidence No. 2-4, the purport of the whole pleadings

2. Judgment on the Defendant’s main defense

A. The defendant's assertion

The correction claim system under the Framework Act on National Taxes stipulates that when the declared amount exceeds the tax base and tax amount to be reported under the tax laws, or falls short of the deficit amount or tax amount to be returned under the provisions of the Income Tax Act and the Enforcement Decree of the same Act, the plaintiff filed a correction claim in this case on the grounds that the above provisions of the Enforcement Decree were violated. Thus, this does not constitute the grounds for filing a correction claim. Therefore, even if the defendant rejected a correction claim by the plaintiff, it cannot be

B. Determination

Article 45-2 (1) 1 of the Framework Act on National Taxes provides that "if the tax base and tax amount entered in the return of tax base exceeds those to be reported under tax-related Acts, as one of the grounds for filing a request for correction, the plaintiff shall be the acquisition value calculated under Article 163 (9) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003; hereinafter the same shall apply) within the original statutory return period, and the plaintiff shall make a preliminary return of the tax base of capital gains tax and then seek correction of the tax base and tax amount by again calculating the acquisition value pursuant to Article 163 (12) of the Enforcement Decree of the Income Tax Act on the ground that the above provision of the Enforcement Decree is null and void, on the premise that the tax base and tax amount initially reported exceeds the tax base and tax amount to be reported under legitimate provisions of the Income Tax Act. Thus, the defendant's rejection of the above request for correction shall be subject to

Therefore, the defendant's main defense is without merit.

3. Judgment on the merits

A. The plaintiff's assertion

In light of the relevant laws and regulations, where the actual transaction value at the time of acquiring expensive houses as a gift is unknown, the acquisition value of assets donated as necessary expenses to be deducted from the transfer value shall be calculated by the transaction example value, appraisal value, or conversion value under Article 97 (1) 1 (c) of the Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003; hereinafter the same shall apply). Thus, the Plaintiff’s request for correction by reducing the tax base and tax amount due to the conversion value is justifiable. The method prescribed in Article 163 (9) of the Enforcement Decree of the Income Tax Act (hereinafter the “instant provision”) which the Defendant uses as the provision of the said acquisition value as the basis for the above acquisition value is null and void as it goes against the principle of substantial taxation or excessive prohibition. Thus, the instant disposition is unlawful.

(b) Related statutes;

As shown in the attached Form.

C. Whether the instant disposition is lawful

According to Articles 94 (1), 96 (1), and 97 (1) 1 (a) (proviso) and (c) of the Income Tax Act, in cases where a transferred asset falls under a high-priced house, etc., the transfer value and acquisition value shall be calculated based on the actual transaction value. In such cases, if it is impossible to confirm the actual transaction value at the time of acquisition, the amount calculated by applying in sequence the transaction example, appraisal value, or conversion value as prescribed by the Presidential Decree, and Article 97 (5) of the Income Tax Act provides that "the necessary matters concerning the calculation of necessary expenses, such as the scope of the actual transaction value required for acquisition, and the calculation of gift tax amount, shall be prescribed by the Presidential Decree," and in applying the proviso of Article 97 (1) 1 (a) of the Act to the assets inherited or donated, the provisions of this case provide that "the value appraised under the provisions of Articles 60 through 66

In light of the purport of the above provisions, in case where the transfer income is calculated based on the actual transaction value in accordance with the proviso of Article 97 (1) 1 (a) of the Income Tax Act as assets other than the assets inherited or donated, and thus the transfer income is calculated based on the actual transaction value, if it is impossible to confirm the actual transaction value required for such acquisition, it shall be calculated based on the transaction example, appraisal value, or conversion value as prescribed by the Presidential Decree. However, in case where the assets inherited or donated are to be calculated based on the actual transaction value pursuant to the proviso of Article 97 (1) 1 (a) of the Income Tax Act as they fall under the expensive house, etc., there is no actual transaction value at the time of acquisition, and accordingly, there is a separate provision as to the actual transaction value at the time of acquisition.

Therefore, the provision of this case cannot be deemed as the provision of Article 97 (5) of the Income Tax Act which delegates necessary matters concerning the calculation of necessary expenses such as the "scope of actual transaction price required for acquisition" so that it can be prescribed by the Presidential Decree, and thus, it cannot be deemed as the invalid provision which unreasonably expands the taxation requirement beyond the delegation scope of the parent law in light of the fact that the value corresponding to the tax base of inheritance tax or gift tax (value assessed under Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencement of inheritance or donation) is recognized as necessary expenses in calculating transfer margin and that the imposition of transfer income tax can prevent tax evasion or double taxation only when the transfer value exceeds the above value.

Therefore, the defendant's disposition rejecting the plaintiff's request for correction pursuant to the provision of this case is legitimate, and the plaintiff's assertion is without merit.

5. Conclusion

Therefore, the judgment of the court of first instance that shares the same conclusion is just, and the plaintiff's appeal is dismissed as it is so decided as per Disposition.

Indication of the relevant statutes

former Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003)

○ Scope of transfer income under Article 94 of the Income Tax Act

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

○ Transfer Value of Article 96 of the Income Tax Act

(1) The transfer value of assets referred to in Article 94 (1) 1 and 2 shall be the standard market value at the time of transfer of the assets concerned: Provided, That where the assets concerned fall under any of the following subparagraphs, the actual transaction value between the transferor and transferee (hereinafter referred to as “actual transaction value”) shall apply:

1. Where the relevant assets fall under the standard for expensive houses under the provisions of subparagraph 3 of Article 89 (including the land annexed thereto);

Article 97 of the Income Tax Act: Calculation of Necessary expenses for capital gains

(1) In calculating gains on transfer of a resident, necessary expenses to be deducted from the transfer value shall be as follows:

1. Acquisition value:

(a) In case of assets as prescribed in Article 94 (1) 1 and 2, the standard market price at the time the assets are acquired: Provided, That in case where the assets concerned fall under any of subparagraphs of Article 96 (1), it shall be based on the actual transaction price required for the acquisition of such assets;

(c) In the case of proviso (a) or (b), where it is impossible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value

(5) Matters necessary for calculation of necessary expenses, such as the scope of actual transaction price required for acquisition and gift tax amount shall be prescribed by Presidential Decree.

The Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 18173 of December 30, 2003)

Article 156 of the Enforcement Decree of the Income Tax Act

(1) The term “high-priced house the value of which exceeds the standard determined by the Presidential Decree” in subparagraph 3 of Article 89 of the Act means a house and its appurtenant land in excess of 600 million won by adding up the actual transaction value at the time of transfer (where a part of a house is transferred, referring to the amount calculated by dividing the total sum

Article 163 of the Enforcement Decree of the Income Tax Act: Necessary expenses for transferred assets

(9) In the application of the provisions of Article 97 (1) 1 (a) (proviso) and (b) of the Act to the assets received by inheritance or donation (excluding the donation under the provisions of Articles 33 through 42 of the Inheritance Tax and Gift Tax Act), the amount appraised under the provisions of Articles 60 through 66 of the 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 at the time of acquisition: Provided

(10) In the application of the provisions of Article 97 (1) 1 (a) (proviso) and (b) of the Act, where the gift tax is imposed under Articles 33 through 42 of the Inheritance Tax and Gift Tax Act, the value of relevant donated property, or the increase or decrease thereof shall

(12) The term “amount of transaction example, appraisal value or conversion value as prescribed by the Presidential Decree” in Article 97 (1) 1 (c) of the Act means the amount as provided in the provisions of Article 176-2 (2) through (4).