(a) Methods for calculating gains on transfer under the Income Tax Act;

(b) In cases where the tax authority does not determine and notify the transfer margin and the amount of tax to a person who has not made the expected return on the profits accruing from the transfer, the calculation of transfer margin and the return based on the standard market price, and the imposition

(c) Whether any incidental expenses, such as registration tax, are included in the acquisition value based on the calculation of the special deduction amount for capital gains, where the capital gains are determined based on the standard market price

(a) In case where assets are transferred, if documentary evidence which enables to confirm the actual transaction value in making the preliminary return of transfer margin or the final return of tax base, is submitted, the transfer margin shall be calculated on the basis of the actual transfer and acquisition value, or if there is no such report or documentary evidence is submitted even if there is no such report or such report, the transfer margin shall be calculated on the basis of the standard market price, and even if the actual

B. Even though there was no notification of transfer margin and amount of tax by the tax authority’s prior guide under Articles 99, 94, 146, and 142(3) of the Income Tax Act on a taxpayer who did not make a preliminary return of gains from transfer of assets, the transferor may obtain gains from transfer based on the actual transaction price by filing a final return with the tax authority along with evidential documents to verify the actual transaction price at the latest prior to the expiration of the period for the final return on transfer, and by making the final return on tax base with the tax authority. According to Article 101(1)7-2 of the Income Tax Act, a person who is exempted from the obligation to make the final return on tax base is limited to a resident having only the gains from transfer, and if there is no report or final return on tax base or no evidentiary document is submitted, the tax authority shall calculate gains from transfer based on the standard market price.

(c) “Acquisition value” under Article 23(2)1 of the Income Tax Act is a concept that covers the actual transaction value and the standard market price, and where the gains on transfer are determined based on the actual transaction value, the special deduction amount is calculated by multiplying the sum of the actual acquisition value including the registration tax, acquisition tax and other incidental expenses, and facilities and improvement expenses, and the capital expenses as determined by the Presidential Decree by the special deduction rate according to the period of asset holding, and where the gains on transfer are determined based on the standard market price, it is calculated by multiplying the standard market price at the time of acquisition by the special deduction rate according to the period of asset holding. Therefore, in determining gains on transfer

(a) Articles 23(4) and 45(1)1 of the Income Tax Act, Article 170(4)3(b) of the Enforcement Decree of the same Act, Articles 99 and 94 of the same Act, Articles 146 and 142(3)(c) of the Enforcement Decree of the same Act; Article 23(2)1 of the same Act, Article 46(3) of the Enforcement Decree of the same Act;

A. Supreme Court Decision 86Nu287 delivered on February 10, 1987, 88Nu2908 delivered on February 14, 1989, Supreme Court Decision 87Nu693 Delivered on November 24, 1989. Supreme Court Decision 85Nu419 delivered on April 28, 1987, Supreme Court Decision 87Nu1019 delivered on April 12, 198

[Judgment of the court below]

Daejeon Head of the tax office

Seoul High Court Decision 87Gu1141 delivered on June 8, 1988

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

As to the ground of appeal by the Plaintiff’s attorney:

1. According to Articles 23(4) and 45(1)1 of the Income Tax Act and Article 170(4)3 of the Enforcement Decree of the same Act, in case where assets are transferred, if evidential documents are submitted to confirm the actual transaction price in the preliminary return on transfer margin or the final return on tax base, the transfer margin shall be calculated based on the actual transfer and acquisition value, or if no evidential documents are submitted even if there is no such report or report, the transfer margin shall be calculated based on the standard market price, and even if the actual transaction price is confirmed after the period for the final return on tax base expires, the transfer margin shall not be calculated based on the actual transaction price (see, e.g., Supreme Court Decisions 86Nu287, Feb. 10, 1987; 87Nu693, Nov. 24, 1987). The judgment of the court below to the same purport is justifiable, and there is no error of law

2. According to the provisions of Articles 99 and 94 of the Income Tax Act, Articles 146 and 142(3) of the Enforcement Decree of the same Act, the chief of the district tax office having jurisdiction over the domicile shall immediately determine the transfer margin and the amount of tax on the transferor of assets who has not made the marginal profit accruing from the transfer of assets, enter them in the tax payment notice, and notify the transferor in writing. However, even if the tax authority did not take such measures, the transferor may obtain the gains from transfer based on the actual transaction price by filing a final return with the tax authority, along with evidential documents verifying the actual transaction price at the latest until the

According to Article 101 (1) and 7-2 of the Income Tax Act, a person who is exempted from an obligation to make a final return of capital gains is limited to a resident having only the income accruing from the transfer and who has not made the provisional return of capital gains, so even though there was no notification of the transfer margin and the amount of tax by the prior guidance of the tax authority, the obligation of the tax authority to make the final return is not exempted, so if there is no preliminary return of the transfer margin or the final return of capital gains from the transfer of assets or there is no submission of evidential documents even if there is such a report, the tax authority should calculate the transfer margin based on the standard market price, and the tax authority can impose the additional tax for negligent return and the additional tax for negligent payment on a taxpayer who has not made the final return and the voluntary payment (see Supreme Court Decision 85Nu419, Apr. 28, 198; Supreme Court Decision 87Nu1019, Apr. 12, 1988). The

3. Article 23 (2) 1 of the Income Tax Act provides, “The amount obtained by multiplying the acquisition value by the rate as determined by the Presidential Decree and the period from the date of acquisition until the date of transfer” with respect to the special deduction for capital gains to be deducted from the gains from transfer, and Article 46 (3) of the Enforcement Decree of the same Act provides, “The acquisition value in Article 23 (2) 1 of the Act refers to the amount based on the standard market price at the time of acquisition of the relevant assets: Provided, That where the acquisition value is calculated based on the actual transaction value, it shall be the amount under Article 45 (1) 1 through 3 of the Act.” In full view of such provisions and Articles 45 (1) of the Income Tax Act, Articles 94 and 86 (1) of the Enforcement Decree of the same Act, and Article 17 of the Enforcement Rule of the same Act, the term “special deduction for capital gains” means the concept of the actual market price and the amount of gains from transfer; where the acquisition tax is determined based on the actual market price, the acquisition tax and other expenses are not unlawful;

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 Yoon Young-young (Presiding Justice)