Written Internet Visit Counseling Team-1607 (2007.05.18)

Transfer

Where the acquisition price of the standard market price is the acquisition price because the actual transaction price at the time of acquisition cannot be confirmed, such as inheritance and donation, etc., other necessary expenses shall be 3/100 of the standard market price at the time of acquisition.

1. In calculating gains on transfer of assets, the acquisition value shall be based on the actual transaction value if the transfer value is based on the actual transaction value. In this case, the acquisition value of real estate acquired by inheritance or donation shall be deemed the actual transaction value at the time of its acquisition, which is 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;

Article 97 of the Income Tax Act (Calculation of Necessary Expenses for Transfer Income)

1. A summary of the contents of inquiry;

【Fact-Finding】

- When selling inherited land, the value of transfer shall be subject to the actual transaction and the acquisition value shall be subject to the standard market price.

【Definition of Pledge】

- Other necessary standards for calculation of acquisition value of an immovable acquired by inheritance shall be the standard market price at the time of transfer.

2. Materials on the contents of questioning;

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

○ Article 97 of the Income Tax Act (Calculation of Necessary Expenses in Transfer Income)

(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 ( December 31, 2005),

(a) Actual transaction price required for the acquisition of assets under subparagraphs of Article 94 (1): Provided, That in cases falling under the main sentence of Article 96 (2), the standard market price at the time of acquisition of the relevant assets (amended on December 31, 2005);

(b) In the case of the text of item (a), where it is impossible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value as determined by the Presidential Decree; and

2. Capital expenditure, etc. prescribed by the Presidential Decree (No. 29 on December 29, 2000);

3. Number of houses ( December 29, 2000)

4. Transfer expenses, etc. as prescribed by the Presidential Decree (No. 29 of December 29, 2000).

(3) The calculation of necessary expenses for capital gains under the provisions of paragraphs (1) and (2) shall be as follows:

1. Where the acquisition value is based on the main sentence of paragraph (1) 1 (a), necessary expenses shall be the amount obtained by adding the amount under paragraph (1) 1 (a) (where it falls under paragraph (2), the amount under paragraph (2)) to the amount under paragraph (1) 1 (a) and 2 through 4 (the date of December 31, 2005); and

2. In cases other than those under subparagraph 1, necessary expenses shall be the amount calculated by adding the amount under the proviso to subparagraph 1 (a) and (b) and (7) of paragraph (1) to the amount under paragraph (1) 1 and the amount under the conditions as prescribed by the Presidential Decree by assets (the amended on December 30, 206

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

○ Enforcement Decree of the Income Tax Act 【Necessary expenses for transferred assets】

(3) The term "capital expenditure, etc. prescribed by Presidential Decree" in Article 97 (1) 2 of the Act means those falling under any of the following subparagraphs:

1. Capital expenses computed by applying mutatis mutandisArticle 67 (2) ( December 29, 200);

2. Where litigation is instituted after the transfer is acquired, the amount obtained by subtracting the costs of lawsuit, reconciliation costs, etc. directly required to secure the ownership of the transferred property, which are included in necessary expenses in calculating each income amount of the year during which the payment has been made (amended on December 29, 200);

3. Expenses paid for the alteration, improvement, or convenience of use of the transferred asset (the cost of December 29, 2000).

(6) For the purpose of Article 97 (3) 2 of the Act, the term “amount as prescribed by the Presidential Decree” means the amount falling under any of the following subparagraphs:

1. Earth and sand ( December 31, 1997 amended); and

Individual officially assessed land price referred to in Article 99 (1) 1 (a) of the Act at the time of its acquisition 】 3/100 (3/1000 in cases of unregistered transferred assets referred to in Article 104 (3) of the Act);

2. Dried water (it shall be December 31, 1997)

(a) Building under Article 99 (1) 1 (c) of the Act (including its appurtenant land) and housing under item (d) of the same subparagraph (including January 5, 2005);

Value under Article 99 (1) 1 (c) or (d) of the Act at the time of its acquisition 】 3/100 (3/1,000 in cases of unregistered transferred assets under Article 104 (3) of the Act)

(b) Buildings other than those under item (a) (with the exception of December 31, 199).

Value under Article 99 (1) 1 (b) of the Act at the time of its acquisition 】 3/100 (3/1000 in cases of unregistered transferred assets under Article 104 (3) of the Act);

3. Assets under Article 94 (1) 2 (b) and (c) of the Act (excluding unregistered transferred assets under Article 104 (3) of the Act):

Standard market price at the time of its acquisition ¡¿ 7/100

4. Assets other than those as referred to in subparagraphs 1 through 3:

Standard market price at the time of acquisition ¡¿ 1/100

(7) “Assets as prescribed by the Presidential Decree” in Article 97 (4) of the Act shall mean the assets under Article 94 (1) 4 (b) of the Act (amended by December 30, 2003).

(8) The amount equivalent to the gift tax under the provisions of Article 97 (4) and (5) of the Act shall be the amount calculated by multiplying the calculated amount of gift tax (referring to the calculated amount of gift tax under the provisions of Article 56 of the Inheritance Tax and Gift Tax Act) on the assets donated by the resident to his spouse pursuant to the provisions of Article 97 (4) of the Act by the ratio of the value of relevant assets (referring to the taxable value of donated property on which gift tax is levied) transferred pursuant to the provisions of Article 97 (4) of the Act to the taxable amount of gift tax under the provisions of Article 47 of the Inheritance Tax and Gift Tax Act. In this case, the amount equivalent to the gift tax to be included in necessary expenses shall be limited to the balance

(9) In the application of the provisions of the main sentence of Article 97 (1) 1 (a) 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 value 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

(b) Similar cases (judicial precedents, judicial precedents, review precedents, and established rules);

○ document 5 teams-1588, 17 May 2007

【Reasoning】

Transfer margin shall be calculated by deducting necessary expenses from the transfer value, and necessary expenses shall consist of acquisition value, capital expenses, and transfer expenses;

(1) recognize the necessary expenses only when the acquisition value is reported at the actual transaction price; and

(2) When applying the conversion value, only the amount prescribed in Article 163(6) of the Enforcement Decree of the Income Tax Act shall be recognized.

- In the case of land inherited, whether either of the above paragraphs (1) and (2) applies to the calculation of necessary expenses (in the absence of taxation, a return of inheritance tax)

【Correspondence】

1. In calculating gains on transfer of assets, if the transfer value is based on the actual transaction value, the acquisition value shall be based on the actual transaction value, and in this case, the acquisition value of real estate acquired by inheritance or donation shall be deemed the actual transaction value at the time of its acquisition, which is appraised under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of

2. In case where the gains on transfer of assets are calculated on the basis of the actual transaction price, the other necessary expenses shall be those as referred to in Article 97 (1) 2 through 4 of the Income Tax Act: Provided, That in case where the actual transaction price at the time of acquisition cannot be confirmed, and the converted price is the acquisition price, the other necessary expenses shall be the amount as referred to in Article 163 (6) of the Enforcement Decree

○ document 4 teams-12, 2006.01.05

【Reasoning】

(De Facto Relations)

The purpose is to transfer donated assets and report the transfer value as the actual transaction price.

(Definition of Pledge)

1. In case where the acquisition value of donated assets is the standard market value, the estimated deduction shall be applied in the calculation of other necessary expenses; and

2. In case where the acquisition value of donated assets is converted, the estimated deduction shall be applied in the calculation of other necessary expenses; and

【Correspondence】

1. In calculating gains on transfer of assets, if the transfer value is based on the actual transaction value, the acquisition value shall be based on the actual transaction value, and in this case, the acquisition value of real estate acquired by reason of donation shall be considered as the actual transaction value at the time of acquisition, which is appraised under Articles 60 through 66 of the Inheritance Tax and Gift Tax

2. Where gains on transfer of assets are calculated on the basis of the actual transaction price, other necessary expenses shall be those as referred to in Article 97 (1) 2 through 4 of the Income Tax Act: Provided, That where the conversion price is calculated on the basis of the actual transaction price at the time of acquisition as it is impossible to confirm the actual transaction price at the time of acquisition, other necessary expenses shall be the amount as referred to in Article

○ document 4 teams-1769, 205.27

1. Omitted;

2. Where gains on transfer of assets are to be returned and paid on the basis of the actual transaction price under each subparagraph of Article 96 (1) of the Income Tax Act, the transfer and acquisition value shall be based on the actual transaction price, and in this case, the acquisition value of real estate acquired on the grounds of donation shall be deemed the actual transaction price at the time of acquisition as of the date of donation.

○ document 4 teams-1945, October 21, 2005

Where the gains on transfer are calculated based on the actual transaction value by transferring a house (including appurtenant land) located within the housing speculation area, if it is impossible to confirm the actual transaction value at the time of acquisition, the necessary expenses to be deducted from the transfer value shall be the sum of the acquisition value calculated by applying gradually the transaction example, appraisal value, conversion value pursuant to the provisions of Articles 97 (1) 1 (c) and 176-2 (2) through (4) of the Income Tax Act and the estimated deduction amount under Article 97 (3) 2 of the same Act and Article 163 (6) of the Enforcement Decree of the same Act (in cases of real estate, the standard market price at the time of acquisition 】 3 percent (in cases of unregistered transferred assets), and the expenses such as the real estate brokerage commission, etc. paid other than the estimated deduction