National High Court Decision 2008west0946 ( October 13, 2008)

Whether it should be determined excluding the details of real estate transactions by family members in determining whether it falls under real estate transactions.

The determination of whether a real estate is a real estate sales business shall be made not only by the relevant transfer, but also by taking into account the circumstances before and after the relevant transfer period throughout the entire real estate held by the transferor, and it shall be deemed that the real estate transactions are conducted continuously and repeatedly by the

The contents of the decision shall be the same as attached.

Article 19 (Business Income)

Article 34 (Scope of Real Estate Sale Business)

1. All of the plaintiffs' claims are dismissed.

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

The Defendant’s imposition of global income tax of KRW 68,954,120 for the year 2003, and global income tax of KRW 394,556,760 for the year 2003 as of November 1, 2007, and global income tax of KRW 394,556,760 for the year 2003, and value-added tax of KRW 84,164,20 for the first period for the year 2003 as of December 1, 207 shall be revoked.

1. Details of the disposition;

"A. The plaintiffs, as married couple in 2003, transferred ○○○○○○, 00-3 large 1,476 square meters and four real estate (hereinafter referred to as "real estate in dispute"), and reported and paid transfer income tax in the same manner as "the individual real estate is indicated in the order indicated below," and "B. The defendant considered the transfer of the plaintiffs' real estate as real estate in real estate transaction, and deemed the transfer of the plaintiffs' real estate as the real estate transaction, on November 1, 2007, 68,556,760 won of global income tax for 203 and 84,164,200 won of value-added tax for 1 year 203 to Y○○○○ on December 1, 2007 (hereinafter referred to as the "disposition in this case") and notified the plaintiff Y○○ on December 1, 2007, respectively, that there is no dispute over the facts set forth in subparagraphs 1 through 31, 201-3.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The transfer of real estate by the plaintiffs is unlawful in the instant disposition that is imposed on real estate sales business even though it does not have business objectives because it is not for profit margins, but for continuous and repetitive transfer of real estate acquired as a substitute for business facility funds or for the relocation of residence as follows.

In other words, the real estate Nos. 1 and 2 was acquired in a lump sum for the construction of a house, and was owned without the construction of a house in opposition of the neighboring residents. It was transferred en bloc to ○○○○○○○○○○○○○○○○○○○○○○○○○, which began around 2004. ② The real estate Nos. 3 was announced that the real estate will take place at ○○○○○○, which is the plaintiffs’ residence, around 2002, will not be viewed as non-taxation benefits for the transfer of existing house after purchasing a house and then selling it to ○○○○○, which is a site for establishing a new house. ③ The real estate Nos. 4 was also purchased for the purpose of replacing the real estate to ○○○○○○○○○○○, which was owned by the plaintiffs and transferred it to 15 years, and it was unlawful for the plaintiffs to purchase or sell the real estate to 20 years or more.

Article 19 (Business Income)

Article 34 (Scope of Real Estate Sale Business)

(c) Fact of recognition;

The following facts are either disputed between the parties or acknowledged by the statements in Gap evidence and Gap evidence.

1) Real estate traded since 1980 by Y○, Y○, Y○, Y○○, and Y○○○, who are children of the Plaintiffs and the Plaintiffs, is about 200 items, which are 56 items among them, and 73 items, respectively.

2) The real estate currently owned by the Plaintiffs and their children is about 53 cases, and the estimated price based on the officially announced land price reaches about 29 billion won, and the Plaintiff Seo-○ and Seo-○ possess 14 cases, and 16 cases.

3) The Plaintiffs shared shares with their children and received rent in their names even after they donated co-ownership shares to ○○○○○○-dong 143-6, ○○○-dong 143-6, and ○○○-dong 110-1 located in ○○-dong 110-1.

4) From 1981 to 2006, the period satisfying the frequency requirements prescribed in Article 1 of the Enforcement Rule of the Value-Added Tax Act during the second taxable period of the Value-Added Tax Act for which the Plaintiffs and their children engaged in real estate transactions reaches 15 taxable periods.

5) In addition to the transaction of real estate in the first half of 2003, the Plaintiffs acquired the site of ○○○○○○-dong 584-49, and donated the site of ○○○○○○-dong 320-40 to the Plaintiff ○○○○○○-dong 320-40, and made a real estate transaction with which the Plaintiff acquired the right to claim a transfer of ownership on one apartment bonds located in ○○○-dong 222, ○○-dong 222.

6) With respect to real estate Nos. 1 and 2, a sales contract was concluded on February 13, 2003, and the registration of ownership transfer was made on April 3, 2003. The plaintiffs concluded a sales contract on the land and building of ○○○○ Coin on April 12, 2004

D. Determination

Whether the transaction of real estate constitutes a real estate trading business, which is a requirement for taxation of business income tax and value-added tax, shall be determined according to social norms by considering the transferor’s acquisition and holding of real estate, the existence of real estate, frequency, mode, other party, etc., in light of whether the transfer aims to profit from the transfer, and the continuity and repetition of business to the extent that it can be seen as business activity. The determination should take into account not only the transfer of the relevant real estate, but also all the circumstances before and after the transfer of the relevant real estate held by the transferor (see, e.g., Supreme Court Decision 9Du5412, Apr. 24, 2001).

However, as seen above, considering the following circumstances, i.e., ① the Plaintiffs and their children have traded real estate since 1980, 200 items, 56 items, and 73 items among them, 53 items are currently owned by the Plaintiffs and their children, 14 items, 16 items, and 16 items among them are owned by the Plaintiffs and 14 items, and 9 items of real estate transaction among them are owned by the Plaintiffs and 19 items of real estate, which are difficult to be considered as 15 items of real estate transaction for 19 years from 1981 to 206, 200 items of real estate transaction, and 14 items of real estate transaction, including real estate transaction, were acquired by the Plaintiffs and 14 items of real estate transaction before and after 20 years from 197 items of real estate transaction. It is difficult to view that the Plaintiffs and 200 items of real estate transaction were more likely to have been determined as 15 days before and after 19 years from 200 items of real estate transaction.

3. Conclusion

Therefore, the plaintiffs' claim is dismissed as it is without merit. It is so decided as per Disposition.