Plaintiff (Law Firm Jeong, Attorneys Lee Lee In-hoon, Counsel for plaintiff-appellant)

Head of Yeongdeungpo Tax Office

November 26, 2009

1. The Defendant’s disposition rejecting refund of KRW 9,338,590 to the Plaintiff on August 12, 2008 is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. (1) On December 3, 2007, the Plaintiff transferred 1,609.50 square meters out of 40,338 square meters of land (number omitted) in Jung-gu, Jung-gu, Incheon, Jung-gu, Incheon, which was expropriated (consultation transfer) to the Korea Land Corporation, and received cash indemnity amounting to KRW 338,729,100 from the Korea Land Corporation, and received KRW 1,058,729,100 of total amount of cash indemnity amounting to KRW 720,00,000. The Plaintiff paid KRW 1,058,729,729,100 on February 27, 2008 as the transfer value of the said land (the transfer date was changed to January 18, 2008).

(2) Meanwhile, the amount of compensation for the instant claim is the sum total of the face value of the compensation bonds acquired by the Plaintiff due to the Plaintiff’s expropriation (the amount of compensation bonds for the Incheon Urban Development Corporation (U.S.) and the land development 37TT14, hereinafter “instant compensation bonds”). The appraisal loss at the time of the acquisition of the instant compensation bonds is KRW 28,82,824.

B. (1) On May 1, 2008, the Plaintiff filed a request for correction with the Defendant to refund KRW 9,338,590 for the transfer income tax belonging to the year 2008, by claiming that the assessment value of the compensation claim should be calculated by deducting the loss from the necessary expenses or the loss from the sale value (the loss from sale shall be limited to 34,646,40 won or the loss from sale) incurred when acquiring the compensation claim acquired through the expropriation as above.

(2) Accordingly, the Defendant rendered the instant disposition rejecting the Plaintiff’s request for correction on the ground that the initial details of return filed by the Plaintiff, computed the transfer value by contract between the parties through adequate evaluation process under Article 163(5) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20720, Feb. 29, 2008; hereinafter the same) and the loss from sale of compensation claims acquired by expropriation on August 12, 2008, cannot be deemed as necessary expenses under Article 163(5) of the Enforcement Decree of the Income Tax Act. The Defendant rendered the instant disposition rejecting the Plaintiff’s request for correction on the ground that the original details of return filed by the Plaintiff are lawful.

[Ground of recognition] Facts without dispute, Gap evidence 1, 3 through 8, Eul evidence 1, Eul evidence 2-1, 2, Eul evidence 3-1 and 2, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The loss from appraisal or sale of the instant compensation claim falls under the expenses that are inevitably incidental to the expropriation inevitably incurred in the course of paying the compensation calculated on a cash basis pursuant to Article 63(1) of the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects as bonds pursuant to Article 63(7) of the same Act and Article 97(1)4 of the Income Tax Act and Article 163(5)1 of the Enforcement Decree of the same Act and constitutes the expenses that are deducted in the calculation of gains from transfer because it constitutes the expenses directly disbursed to transfer the assets.

(2) The claim compensation is compensated for the expropriation price with bonds. The Plaintiff’s acquisition of the instant claim for compensation is mandatory in accordance with the purport of the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects to prevent speculation regardless of his/her will, and thus, it shall be deemed that the land expropriation was made. Therefore, in calculating the transfer value in the case of the claim for compensation for bonds, it shall be deemed that the value at the time of

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) First of all, we examine the Plaintiff’s above assertion. Article 97(1)4 of the Income Tax Act provides that “The expenses prescribed by the Presidential Decree, such as transfer expenses, etc.” as one of the necessary expenses to be deducted from the transfer value in calculating gains on transfer of a resident. Article 163(5)1 of the Enforcement Decree of the Income Tax Act provides that “transfer expenses, etc. prescribed by the Presidential Decree” shall be the expenses paid directly for the transfer of assets under the Securities Transaction Tax Act, and Article 97-12 of the Income Tax Act provides that “the expenses disbursed for the transfer of assets shall include the expenses for written contract preparation, notarized expenses, stamp, brokerage expenses, etc. for the transfer of assets.” In light of the purport of each of the above Acts and subordinate statutes, it is reasonable to view that “expenses directly disbursed for the transfer of assets” means expenses not disbursed for the transfer of the assets in question, such as expenses for written contract preparation, notarized expenses, stamp, and brokerage expenses. Therefore, the Plaintiff’s assertion is not justified solely on the grounds asserted by the Plaintiff.

(2) Next, the Plaintiff’s assertion is considered as follows: ① Article 63 subparag. 1, 6, and 7 of the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects; and Article 27 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 2071 of Apr. 17, 2008) provides that compensation shall be paid in cash if a project implementer expropriates land for public works; however, it may be paid with bonds if it exceeds KRW 10 million out of the compensation amount for the land owned by an absentee real estate owner; ② The difference between the amount of compensation bonds purchased at the time of sale and the face value of the bonds at the time of sale under the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 2065 of the Income Tax Act) is mandatory in light of the fact that the Plaintiff’s disposal of the bonds is no real estate owner who is likely to acquire land speculation and the amount of compensation bonds at the time of sale under the same Act (see Article 95). 2 of the Income Tax Act).

3. Conclusion

If so, the plaintiff's claim shall be accepted on the grounds of its reasoning, and it is so decided as per Disposition.

[Attachment-Related Acts and subordinate statutes omitted]

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