Where an existing apartment is reconstructed and completed, the time of acquisition shall be the time of acquisition of the existing apartment.

Where an existing apartment is reconstructed with respect to non-taxation of capital gains tax on temporary two houses, the time of acquisition of the reconstruction apartment shall be the time of acquisition of the existing apartment subject to reconstruction.

Article 89 (Non-Taxable Transfer Income Tax of the Gu)

Article 94 (Scope of Transfer Income Tax of the Gu)

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s disposition of imposition of capital gains tax of KRW 15,970,860 for the Plaintiff on May 2, 2006 shall be revoked.

2. Purport of appeal

As set forth in the text.

1. Circumstances of dispositions;

A. On June 9, 1998, the Plaintiff acquired and owned ○○○○ apartment, 1001, 1001, located in Seoul, ○○○-dong 8, ○○○○-dong (hereinafter “instant apartment”) and invested in the reconstruction association upon the implementation of the reconstruction project on the said apartment. Upon the implementation of the reconstruction project on September 9, 1999, the project plan was approved pursuant to Article 33 of the former Housing Construction Promotion Act (amended by Act No. 6916 of May 29, 2003), and around that time, the Plaintiff was selected as an occupant of ○○○○○○○○ apartment, 1501, (hereinafter “instant apartment”). After that, the Plaintiff moved to and removed the reconstruction project around 201, the Plaintiff completed the reconstruction project on the ground of the instant apartment around 23, 2004.

B. On April 23, 2001, the time when the relocation and removal of the apartment units subject to reconstruction of the instant case occurred, the Plaintiff acquired ○○○dong 2, 111 Dong 504, 1208 (hereinafter “instant apartment units”) and owned and resided in the instant apartment units for not less than three years, and transferred the apartment units to ○○○ on May 2, 2005. At the time of the said transfer, the Plaintiff did not own other houses except the instant reconstruction apartment units at the time of the said transfer.

C. Even after the completion of the instant reconstruction apartment, the Plaintiff resided in the instant apartment, and transferred it on May 6, 2005, and thereafter, ○○○-dong 3, 1331 101 1406, and did not move into the instant reconstruction apartment.

D. The acquisition value of the instant apartment in question was KRW 216,00,000, and the transfer value was KRW 309,500,000, but the Plaintiff did not report and pay the transfer income tax even after the transfer of the instant apartment in question on the ground that the transfer of the instant apartment in question constitutes one house for one household.

E. On May 2, 2006, the Defendant rendered the instant disposition imposing KRW 15,970,860 to the Plaintiff on the ground that the transfer of the instant apartment does not constitute a transfer of one house for one household.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, 8, Eul evidence No. 1, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The Plaintiff: (a) owned and resided in the instant apartment for not less than three years, and transferred the instant apartment at the time of the transfer of the instant apartment; (b) however, the time of its acquisition (the time of its completion) transferred the instant apartment within one year from the date of its acquisition as of August 23, 2004, which constitutes a temporary two houses as stipulated in Article 155(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter referred to as the “Enforcement Decree of the Income Tax Act”).

(2) Defendant: The reconstruction apartment of this case is only an extension of the apartment subject to reconstruction of this case, and cannot be viewed as separate from the apartment subject to reconstruction. Thus, the time of acquiring the reconstruction apartment of this case should not be August 23, 2004, but it should be viewed as June 9, 1998, which is the time of acquiring the reconstruction apartment of this case. Therefore, the Plaintiff does not constitute a temporary two houses subject to reconstruction.

B. Relevant statutes

Article 89 (Non-Taxable Transfer Income Tax of the Gu)

Article 94 (Scope of Transfer Income Tax of the Gu)

C. Determination

(1) Article 89 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005; hereinafter "the Income Tax Act") and Article 155 (1) of the Enforcement Decree of the same Act provide that "in case where one household having one house in Korea has come to possess two houses temporarily by acquiring another house before transferring the house, if it transfers the previous house within one year from the date of acquiring another house, it shall be deemed to be one house for one household and no capital gains tax shall be imposed on it." In the case of the plaintiff, it is different whether the time of acquiring apartment of the reconstruction of this case constitutes one house temporarily depending on whether the time of acquiring apartment of this case is about June 9, 1998 or about August 23, 2004, the time of completion of the reconstruction apartment of this case.

(2) Therefore, if an existing apartment house is reconstructed, the income tax shall not be imposed on the income accrued from the transfer of the house to one household. The purpose of Article 89 subparag. 3 of the Income Tax Act is to transfer the house owned by one household temporarily for the purpose of acquiring the house or for the purpose of speculation and to guarantee the stability of the housing and the freedom of moving the house for the first five years without imposing the income tax on the transfer income tax if the existing apartment house is reconstructed, and the ownership of the house is non-taxable for the first five years after the reconstruction period in light of Article 15 subparag. 3 of the Income Tax Act, Article 15 subparag. 1 and subparag. 16 of the Enforcement Decree of the Income Tax Act, and Article 94 subparag. 2(a) of the Income Tax Act provides that if the ownership of the house for reconstruction is non-taxable for the first five years after the reconstruction period, the ownership of the house can not be acquired for the first five years after the reconstruction period after the reconstruction period, and the ownership of the house can not be acquired for the first five years after the reconstruction period.

(3) If so, the time of acquisition of the rebuilding apartment in the instant case by the Plaintiff shall be deemed to be the time of acquisition of the apartment subject to reconstruction on June 9, 198, and so long as the Plaintiff first transferred the apartment in the instant case that it acquired thereafter, the Plaintiff cannot be deemed to be the temporary two houses subject to capital gains tax. The first Plaintiff’s assertion on a different premise cannot be accepted.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed due to the lack of reason. Since the judgment of the court of first instance is unfair with different conclusions, the defendant's appeal is accepted and the judgment of the court of first instance is revoked, and the plaintiff's claim is dismissed as per Disposition

[Seoul Administrative Court 2007Gudan8082, October 17, 2008]

1. The Defendant’s disposition of imposing KRW 15,970,860 on the Plaintiff on May 2, 2006 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

As set forth in the text.

1.Basics

A. On June 9, 1998, the Plaintiff acquired and held ○○○ apartment, ○○○ apartment, ○○○ apartment, ○○○○○, ○○○○○, 8 located in Seoul, 1998 (hereinafter referred to as “instant apartment subject to reconstruction”). On September 9, 199, the project plan was approved under Article 33 of the former Housing Construction Promotion Act (amended by Act No. 6916 of May 29, 2003), and the subsequent reconstruction was initiated, and the relocation and removal was completed around 201. A new apartment was constructed under the name of ○○○○○ apartment, ○○ apartment, ○○○ apartment, ○○○○ apartment, ○○○, ○○○, ○○, ○○, ○○, and the Plaintiff was selected as a member of the housing reconstruction project, and the Plaintiff reconstructed the instant apartment under the name of 201.

B. On April 23, 2001, which was around the time when the relocation and removal of the apartment subject to reconstruction of this case occurred, the Plaintiff acquired the apartment house of ○○ apartment of ○○ apartment, ○○ apartment, ○○○, ○○, ○○, ○○, ○○, ○○, ○○, (hereinafter “instant apartment”) from ○○, out of ○○, and owned and resided in it for 3 years or longer, and transferred it to Kim○ on May 2, 2005. At the time of the transfer, the Plaintiff did not own another apartment as well as the reconstruction apartment at the time of the transfer.

C. The Plaintiff, even after the completion of the instant reconstruction apartment, was residing in the instant at the instant apartment, transferred it, and around May 6, 2005, the Plaintiff moved into the △△dong, △△dong, △△ apartment, △△△△, △△, △△, and did not move into the instant reconstruction apartment.

D. The acquisition value of the instant at issue apartment was KRW 216,00,000, and the transfer value was KRW 309,500,000, but the Plaintiff did not report and pay the transfer income tax even after transferring the instant at issue apartment on the ground that the transfer of the instant at issue apartment constitutes one house for one household.

E. On May 2, 2006, the Defendant issued the instant disposition imposing KRW 15,970,860 on the Plaintiff as transfer income tax for the year 2005 on the ground that the transfer of the instant apartment does not constitute one house for one household.

(In fact that there is no dispute, Gap's 1 through 4, 8, Eul's 1, and the purport of the whole pleadings.

2. Whether the disposition is lawful;

A. The parties' assertion

The Plaintiff: (a) the Plaintiff: (b) owned and resided in the instant instant apartment for not less than three years; and (c) at the time of the transfer of the instant instant apartment, the Plaintiff owned the instant reconstruction apartment at the time of the transfer of the instant instant instant apartment; (b) but (c) the time of the acquisition (the time of completion) transferred the instant apartment on August 23, 2004 within one year from the date of the acquisition of the instant reconstruction apartment, which constitutes a temporary two houses,

Defendant: The reconstruction apartment of this case is only an extension of the apartment subject to reconstruction of this case, and it cannot be viewed as separate from the previous apartment. Thus, the time of acquiring the reconstruction apartment of this case should be seen as the time of acquisition of the reconstruction apartment of this case on August 23, 2004, but on June 9, 1998, the time of acquisition of the reconstruction apartment of this case. Therefore, the Plaintiff is not a temporary two house owner.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

Article 89 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005; hereinafter the same) provides for non-taxable income from such transfer only in cases where one household possesses one house in the Republic of Korea as of the date of transfer, and Article 154(1) of the Enforcement Decree of the same Act provides for non-taxable income. Article 155(1) of the Enforcement Decree of the same Act provides that where one household who owns one house in the Republic of Korea acquires another house before transferring the house and temporarily acquires the former house within one year from the date of acquiring another house, it shall be deemed as one house for one household (hereinafter the above provision of Article 155(1) provides that if one household acquires another house within one year from the date of acquiring another house, it shall not be deemed as one house (hereinafter the above provision of Article 155(1) of the same Act). The above special provision of temporary two houses shall be applied to the transfer of one house within one year from the date of acquiring another house.

Meanwhile, a member of a reconstruction association under the former Housing Construction Promotion Act has the right to purchase a new house or site and to build a new building unit or welfare facility to be acquired in accordance with the project plan (the status of being selected as a tenant) from the association constitutes a right to acquire real estate under Article 94 (1) 2 (a) of the former Income Tax Act until the ownership of the house, etc. is acquired. In this case, the time of acquisition of the selected status as an occupant is the time of approval of the project plan under Article 33 of the former Housing Construction Promotion Act.

In this case, the plaintiff acquired and possessed the apartment subject to reconstruction of this case on June 9, 1998. However, as the reconstruction project plan was approved on September 9, 1999, the apartment subject to reconstruction was converted into the status of being selected as occupant, and since the above status of being selected as occupant was merely the right to acquire real estate, it cannot be viewed as a house, it cannot be viewed that the plaintiff acquired the apartment subject to reconstruction of this case on April 23, 2001 (the issue apartment of this case was acquired at the time of de facto relocation and removal) and it cannot be viewed that the plaintiff acquired the apartment of this case only after the completion of August 23, 2004. Since the reconstruction apartment of this case became a holder of two houses, the apartment of this case was first acquired after the reconstruction apartment of this case, and it can be viewed that the apartment of this case was temporarily acquired after the reconstruction of this case, and it can be viewed that the apartment of this case was transferred within one year prior to the date of acquiring the apartment of this case.

On the other hand, where one household which has owned two houses in Korea has destroyed one house, newly constructed a new house in that place, and thereafter transferred another house within the period stipulated in Article 155(1) of the Enforcement Decree of the Income Tax Act from that date, the household concerned does not regard the acquisition of a house separate from the existing house in applying the special case of temporary two houses. Thus, it cannot be seen as a case where one household who owns one house in Korea temporarily acquired another house before transferring that house (see Supreme Court Decision 98Du13508, Dec. 8, 1998). However, in applying the special case of temporary two houses, the reason that the existing house and newly built house are not considered separate from the existing house is the result of respecting the legislative intent of the special case of temporary two houses, and it is difficult to view that the above special case of two houses cannot be seen as being applied to the case where one household owns another house from the beginning because it is necessary to acquire another house as a result of reconstruction of the existing house from the beginning.

In addition, Article 71 (2) 4 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Government Administration and Home Affairs No. 476 of December 31, 2005) provides that where a person who participated in a housing reconstruction project as a member of the housing reconstruction project acquires another house during the reconstruction project period of one year or more and resides in a house acquired in accordance with the business plan under the same Act and becomes a director of a household, he/she shall not be subject to restrictions on the period of possession and residence under Article 154 (1) of the former Enforcement Decree of the Income Tax Act. In the case of the plaintiff, he/she shall not be a director of the reconstruction apartment of this case acquired in accordance with the business plan. However, even if the above provision does not meet the requirements under Article 154 (1) of the former Enforcement Decree of the Income Tax Act (three-year possession, and two-year residence), the special provisions of Article 71 (2) 4 of the former Enforcement Rule of the Income Tax Act shall not apply to the plaintiff.

Therefore, the transfer of the key apartment in this case is a transfer of one house for one household as stipulated in Article 89 subparag. 3 of the former Income Tax Act, Articles 155(1) and 154(1) of the Enforcement Decree of the same Act, which is subject to non-taxation, but the disposition in this case otherwise viewed is unlawful.

3. Conclusion

Thus, the plaintiff's claim seeking the cancellation of the disposition of this case is reasonable, and it is decided as per Disposition by admitting it.