[1] The meaning of the actual transaction value, which is the basis for calculating gains on transfer, and in the case of onerous donation in which a donee takes over a donor's obligation, whether the amount of such obligation can be viewed as a transaction price for the donated assets or a consideration for payment (negative)

[2] Whether Article 159 of the former Enforcement Decree of the Income Tax Act, which provides for the method of calculating transfer income tax to be imposed on onerous donation, violates Article 88 (1) of the former Income Tax Act, which is a superior statute (negative)

[3] The case holding that in case of onerous donation on real estate in an speculative area where it is impossible to recognize or confirm the actual transaction price at the time of such transfer, the transfer price and acquisition price, which form the basis for calculating capital gains tax, shall be the amount calculated by multiplying the standard market price at the time of transfer and acquisition by the ratio

[1] The actual transaction price, which is the basis for calculating gains from transfer, is not a general market price that reflects the objective exchange value, but an actual amount as the price for transaction itself or at the time of transaction. In the case of onerous donation in which a donee takes over a donor’s obligation, the amount of such obligation is difficult to be deemed as the transaction price corresponding to the part to be deemed a transfer among the given assets as a whole or donated assets.

[2] Article 159 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003) provides that with respect to the method of calculating the transfer value and acquisition value of the portion of the donated property to be deemed a transfer from the onerous donation, it shall be based on the value of the relevant asset under Articles 96 and 97 (1) 1 of the former Income Tax Act (amended by Act No. 7006, Dec. 30, 2003) and shall be calculated based on the ratio of the portion equivalent to the amount of the debt to the amount of the donated property. This is a reasonable interpretation in accordance with the latter part of Article 88 (1) of the same Act, and it shall not be deemed a violation of superior

[3] The case holding that the transfer value and acquisition value, which form the basis for calculation of transfer income tax, shall be the amount calculated by multiplying the standard market price at the time of transfer and acquisition by the ratio of the amount of debt to the standard market price at the time of transfer and acquisition, where the actual transaction price at the time of transfer cannot be recognized

[1] Articles 88(1), 94(1)1, 96(1)6-2 (see current Article 96(2)7), 97(1)1(a) of the former Income Tax Act (amended by Act No. 7006, Dec. 30, 2003); Article 159 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003); Article 88(1), 94(1)1, and 96(1)6-2 (see current Article 96(1)7 of the Income Tax Act); Article 97(1)1(a) of the former Enforcement Decree of the Income Tax Act (amended by Act No. 18173, Dec. 30, 2003); Article 159 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18065, Dec. 16, 2003); Article 197 subparag. 17(1)

[1] Supreme Court Decision 88Nu12011 Decided July 11, 1989, Supreme Court Decision 97Nu6629 Decided February 9, 1999 (Gong199Sang, 496) Supreme Court Decision 2005Du2971 Decided September 28, 2006 (Gong2006Ha, 1847) / [2] Supreme Court Decision 98Du20018 Decided January 21, 200 (Gong2000Sang, 521)

Plaintiff

The Director of the Pacific District Office

Seoul High Court Decision 2005Nu15580 decided April 7, 2006

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

The actual transaction price, which is the basis for the calculation of gains from transfer, is not a general market price that reflects the objective exchange value, but an actual transaction price itself or at the time of transaction, refers to the amount actually agreed for benefits (see Supreme Court Decision 97Nu629, Feb. 9, 199, etc.). In the case of onerous donation in which a donee, who received assets, takes over the debts of a donor, it is difficult to see that the amount of debts is the transaction price corresponding to the part to be considered as transfer from among the total or donated assets.

On the other hand, Article 159 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003) provides that with respect to the method of calculating the transfer value and acquisition value of the portion to be deemed a transfer among the donated assets, the value of the relevant assets under Articles 96 and 97 (1) 1 of the former Income Tax Act (amended by Act No. 7006, Dec. 30, 2003; hereinafter the same) shall be based on the value of the relevant assets under Articles 96 and 97 (1) 1 of the former Income Tax Act, and the part equivalent to the amount of debts among the donated values shall be calculated by the ratio occupied by the latter part of Article 88 (1) of the former Income Tax Act, which is reasonably interpreted in accordance with the purport of the latter part of Article 88 (1) of the latter part of the Income Tax Act

In light of the records, in the case of onerous donation of this case where the transfer value is based on the actual transaction value as real estate located within the speculative area, the value of the pertinent real estate falls under the case where it is impossible to recognize or confirm the actual transaction value as at the time of transfer, and thus, it is bound to be based on the standard market value pursuant to Article 114(5) of the former Income Tax Act. Thus, the transfer value of the portion to be transferred among the real estate of this case shall be calculated by multiplying the standard market value as at the time of transfer by the ratio of the amount of debts to the standard market value as at the time of transfer, and the acquisition value shall be calculated by multiplying the standard market value as at the time of acquisition of the real estate

The judgment below to the same purport is just in accordance with the above provisions and legal principles, and it is not erroneous in the misapprehension of legal principles as to onerous donation and no taxation without the transfer income tax, or in the incomplete hearing, as otherwise alleged in the ground of appeal.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Hwang-sik (Presiding Justice)