Cho High Court Decision 2010Du1557 (Law No. 1030, 2010)

Methods for calculating gains on transfer of newly-built house and its appurtenant land acquired by members of a reconstruction association.

In case where a member of a reconstruction association transfers a newly-built house and its appurtenant land acquired, transfer margin based on the actual transaction value shall be calculated by deducting the actual transaction value required for the acquisition of the existing house and its appurtenant land (including the paid liquidation money) from the transfer value.

2010Gudan23142 Revocation of transfer tax

AAA

○ Head of tax office

April 12, 201

may 3, 2011

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposition of capital gains tax of KRW 90,789,150 against the Plaintiff on February 11, 2010 is revoked.

1. Details of the disposition;

A. On June 4, 1990, the Plaintiff acquired and owned ○○○-dong ○○○○○-dong 459-1 ○2 apartment complex 151 208 dong 151 dong 208 (hereinafter “previous Housing”) and provided the previous housing to the association by implementing a housing reconstruction project, and on December 24, 2003, acquired ○○-dong 425 ○○-dong 108 201 dong 201 (hereinafter “multi-family housing”).

B. On December 28, 2006, the Plaintiff transferred the key housing at KRW 600 million, and on February 27, 2007, the transfer value was KRW 600,000, and the acquisition value was KRW 462,380,00 (the amount converted into the standard market price). The Plaintiff reported and paid KRW 26,187,340, the transfer income tax reverted to the year 2006.

C. On February 11, 2010, the Defendant calculated gains on transfer by analogying Article 166(2) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890, Feb. 28, 2007) with the acquisition value as KRW 214,931,240, and then determined and notified an increase in capital gains tax of KRW 90,789,150 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence 1, Eul evidence 1 to 11, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case, the acquisition value of which is 214,931,240 won and the transfer margin is calculated based on the standard market price pursuant to the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890, Feb. 28, 2007; hereinafter referred to as the "former Enforcement Decree of the Income Tax Act"), which was enforced at the time of 2006, is unlawful against the principle of prohibition of retroactive taxation.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) On June 4, 1990, the Plaintiff acquired the previous house in KRW 59,375,240, and disbursed KRW 938,742 as necessary expenses. The appraised value at the time of providing the previous house to the Cooperative was KRW 89,44,00.

(2) In addition to the provision of the previous house to a cooperative, the Plaintiff acquired the key house at issue with additional charges of KRW 155,56,000, and thereafter transferred the key house at KRW 600 million on December 28, 2006, and disbursed KRW 7,302,300 as necessary expenses.

(3) Transfer margin of the key house calculated by analogying the amended provisions and transfer margin calculated by deducting the actual transaction value required for acquiring the existing house and its appurtenant land from the transfer value pursuant to Articles 100(1) and 97(1)1 of the former Income Tax Act (amended by Act No. 8144, Dec. 30, 2006; hereinafter referred to as the “former Income Tax Act”) at the time of transfer of the key house at the time of transfer of the key house (where the settlement money is paid, including the settlement money), is 376,827,718 won in all as follows:

(4) The acquisition value where calculated by analogy of the amended provisions and the acquisition value where calculated under Articles 100(1) and 97(1)1 of the former Income Tax Act at the time of the transfer of the previous house are all 214,931,240 won ( = acquisition value of the previous house + KRW 59,375,240 + additional shares + KRW 155,56,000).

D. Determination

(1) Article 166 (1) of the former Enforcement Decree of the Income Tax Act provides for the method of calculating gains on transfer of a member of a partnership who implements a housing redevelopment project or a housing reconstruction project transfers "the status of a member of the partnership selected as a tenant who provided or acquired the existing building and its appurtenant land to the partnership". However, Article 166 (5) of the same Act provides for the method of calculating gains on transfer under "where a member of the partnership provides the existing building and its appurtenant land to the partnership and transfers "new building and its appurtenant land acquired in accordance with the management and disposal plan" respectively, but it does not provide for separate method of calculating gains on transfer under "where a member of the partnership transfers "new building and its appurtenant land acquired" as above, it is reasonable to calculate gains on transfer under Article 166 (2) of the Enforcement Decree of the Income Tax Act (see Article 19890, Feb. 28, 2007).

(2) In the instant case, when calculating the acquisition value of the housing at issue in accordance with the relevant provisions of the former Income Tax Act, the Plaintiff acquired the previous housing at KRW 59,375,240, and bears KRW 155,56,00 as additional contributions to acquire the housing at issue, so the acquisition value of the housing at issue is KRW 214,931,240, and the Defendant calculated the gains on transfer by deducting the above acquisition value and necessary expenses from the transfer value of the housing at KRW 600,000, and then made the instant disposition. As seen earlier, even if the Defendant calculated the acquisition value and gains on transfer of the housing at issue by analogy of the amended provisions in calculating the acquisition value and gains on transfer of the housing at issue, this would not be said to have violated the retroactive taxation principle.

(3) In addition, the Plaintiff alleged to the effect that the disposition of this case was unlawful since the Defendant entrusted the previous house to a cooperative for a rebuilding project, and the Defendant calculated capital gains on transfer of the key house, and thus, the disposition of this case was also unlawful. However, in the instant disposition, the Defendant did not make the capital gains on transfer by reporting the transfer of the key house trust in the instant disposition. Therefore, the Plaintiff’s aforementioned assertion on

(4) Therefore, the instant disposition that calculated capital gains tax by deeming the acquisition value of the housing at issue as KRW 214,931,240 is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.