[1] Requirements for a real estate transfer income to constitute business income under the Income Tax Act

[2] The method of calculating global income tax where the same entrepreneur newly constructs and sells a house and newly constructs and sells another building that is not a house

[3] Requirements for decision of estimated investigation

[4] The position of the burden of proof as to the rationality of the estimation method and the conversion of the burden of proof

[1] Article 20 (1) 8 of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992) provides for the income accrued from real estate business as one of the business income subject to income tax, and Article 36 subparagraph 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 191) provides that real estate business is real estate sales business. Whether the income accrued from the sale and purchase of a certain real estate constitutes business income under the Income Tax Act or is subject to taxation of capital gains tax shall be determined according to ordinary social norms in consideration of whether the sale and purchase is for profit, its size, frequency, and pattern, etc., and repeatedly, it is difficult to deem that the sale and purchase of real estate constitutes a real estate as a lessor for a period of continuous possession of real estate sale and purchase, and thus, it affects the business feasibility of real estate sales businessman by completing business registration and paying value-added tax on such real estate while paying it.

[2] In a case where the same entrepreneur newly constructs and sells a house and newly constructs and sells a building which is not a house, it constitutes real estate sales business prior to the sale of another building, and in this case, the global income tax shall be calculated in accordance with the special calculation method under Article 82 (2) of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992), Article 134 (2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991), Article 67 (2) of the former Enforcement Decree of the Income Tax Act (amended by Ordinance No. 505 of May 3, 1995).

[3] Under the Income Tax Act, where all documents presented by a taxpayer are insufficient or are suspected to be false, the tax authority may determine the amount of income or tax by means of estimated investigation only when it is unable to determine the amount of income or tax, even if the documents were to be pointed out in illegality and presented new materials after a field investigation is conducted. Even if the relevant books, etc. were found at the stage of litigation seeking the revocation of taxation disposition, if it is impossible for a tax authority to investigate the amount of income or tax due to the lack or falsity of the relevant books, etc., the tax authority should point out the deficiencies or falsity of the books, etc. and request new materials.

[4] If tax base is estimated by means of multiplying the standard income ratio by the total amount of income of a taxpayer identified by the tax authority, and the primary method under Article 120 of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992) and Article 169 (2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991), if the primary method under Article 169 (2) of the former Enforcement Decree of the Income Tax Act is used, the rationality of the estimation method is proved once. Since the real amount is not identified in the sale of real estate subject to taxation is nothing more than the cost of new construction of a building, if the real amount can be calculated by using a reasonable method that can be calculated in the closeest range of the actual amount, the taxpayer needs to prove that there is a method of estimation near such fact.

[1] Article 20 (1) 8 (see current Article 19 (1) 11 and 12) of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992), Article 36 subparagraph 3 (see current Article 34) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991) / [2] Article 20 (1) 5 and 8 (see current Article 19 (1) 6, 11, and 12) of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992), Article 20 (1) 1 and 9 of the former Income Tax Act (amended by Act No. 13540 of Dec. 13, 199), Article 19 (2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 2513940 of the current Enforcement Decree of the Income Tax Act) 519 of Dec. 29, 13940 of the former Act

[1] Supreme Court Decision 90Nu6217 delivered on February 26, 1991 (Gong1991, 1112), Supreme Court Decision 93Nu17522 delivered on September 9, 1994 (Gong1994Ha, 2662), Supreme Court Decision 94Nu14025 delivered on November 7, 1995 (Gong1995Ha, 3939), Supreme Court Decision 96Nu8758 delivered on October 11, 1996 (Gong196Ha, 3362 delivered on December 6, 1996), Supreme Court Decision 96Nu3979 delivered on September 29, 197 (Gong1969, 3362 delivered on December 9, 196) / [2] Supreme Court Decision 99Nu294979 delivered on December 29, 194

Plaintiff 1 and two others

Head of the sericultural Tax Office and one other

Seoul High Court Decision 96Gu27492 delivered on June 11, 1997

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

We examine the grounds of appeal.

On the first ground for appeal

Article 20 (1) 8 of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992; hereinafter the same) provides for the income accrued from the real estate business as one of the business income subject to income tax. Article 36 subparagraph 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991; hereinafter the "former Enforcement Decree") provides that the above real estate business shall be real estate sales business. Whether the income accrued from the sale of a certain real estate constitutes business income under the Income Tax Act or business income subject to capital gains tax under the Income Tax Act, and whether the sale of the real estate is for profit, its size, frequency, and pattern, and so on. Article 20 (1) 8 of the former Enforcement Decree of the Income Tax Act (amended by Act No. 90Nu6217 of Feb. 26, 191) provides that the former Enforcement Decree of the Income Tax Act shall not apply to real estate sales business for the same period of 20 years.

The Second Ground of Appeal

Article 120 of the former Income Tax Act and Article 169 of the former Enforcement Decree are exceptionally acknowledged in cases where there is no account book or documentary evidence of a taxpayer, which serves as the basis for income or tax base, or where it is impossible to use it as a basis for taxation due to lack or falsity of the account book or false contents. Thus, even if there are various documents presented by a taxpayer, the tax authority may determine the income amount or tax base by means of the estimation only when it is impossible to determine the tax base or tax base by means of the estimation investigation in cases where it is impossible to do so after a year from the date of a field investigation, because all documents presented by a taxpayer are defective or false and new materials are presented. However, even if the relevant account book, etc. was found in the litigation stage for revocation of taxation disposition, it cannot be said that the tax authority should point out the deficiencies or falsity of the account book or false parts and request new materials (see Supreme Court Decision 91Nu8203 delivered on July 24, 192).

According to the records, the plaintiffs purchased 357.8 square meters on August 17, 1989 with non-party 2 and constructed 1,130.62 square meters on the land of Songpa-gu Seoul ( Address omitted) 357.8 square meters (hereinafter "the land of this case") and completed registration of preservation of ownership under the names of the plaintiffs and the non-party on April 3, 1990 after completion inspection. The plaintiffs and the above non-party sold the land of this case and the building of this case to 1,40,000,000 won, and there is no other error in law in calculating the price of the building of this case by calculating the tax base of the non-party 1,00,000, and there is no other method of calculating the tax base of the non-party 2's estimation based on the facts charged by the plaintiff 1,57. The defendants's sale of the land of this case and the building of this case, and there is no other method of calculating the tax base of the non-party 1.

As to the third ground for appeal

In order for the estimation tax to be recognized as legitimate, it is not sufficient that the requirements of the estimation tax are met, and the method of the estimation should be generally accepted and generally accepted as the most true income amount in a specific case. However, according to the provisions of Article 120 (1) of the former Income Tax Act, the estimation method should be examined and determined based on the standard rate of income for each type of business, and according to the provisions of Article 169 (2) of the former Enforcement Decree, it can be seen that the estimation method calculated by multiplying the total revenue by the standard rate of income for each type of business is the primary method, and the method of the estimation with the partners is defined as the secondary and supplementary estimation method (see Supreme Court Decision 80Nu29 delivered on July 22, 1980).

In this case, as seen earlier, the defendants estimated the tax base by the method of multiplying the total gross income amount of the plaintiffs by the income standard rate, and used the primary method under Article 120 of the former Income Tax Act and Article 169 (2) of the former Enforcement Decree of the Income Tax Act, so the rationality of the estimation method has been proved once. Thus, the theory of lawsuit is not reasonable because the actual amount is nothing more than the cost of construction of the building of this case since it is nothing more than the cost of construction of the building of this case, the use of the reasonable method that can be calculated most close to the actual amount can be calculated more close to the actual amount. Therefore, it is necessary to prove that there is a method of estimation close to the above facts. (See Supreme Court Decision 86Nu121 delivered on May 24, 198, etc.). Thus, unless the plaintiffs did not submit materials to support this, the defendants' estimation method, which was made by the defendants, is justified, and there is no error in the conclusion of the judgment below as to the rationality of the estimation method affecting the conclusion of the judgment.

Therefore, all appeals are 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 on the bench.

Justices Lee Yong-hun (Presiding Justice)