Where a reconstruction association member who meets the requirements for non-taxation for one house for one household imposes capital gains tax by transferring a right of sale corresponding to a high-priced house, whether he/she may obtain special deduction for long-term holding (affirmative), and the criteria for calculating the retention period for the application of the above

In full view of the purport of Articles 89 subparag. 3 and 95 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005) and Articles 154, 155(16), 156, 159-2 subparag. 2 and 160 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 8705 of Feb. 19, 2005), where a member of a reconstruction association provides an existing house and land to a reconstruction association, and transfers a right to purchase land through the association, the right to purchase land shall be deemed to be a “house” under Article 154(1) of the former Enforcement Decree of the Income Tax Act if the actual transaction price at the time of the transfer meets the requirements for non-taxation of one house for one household, and where transfer income tax is imposed on a high-priced house exceeding 600 million won, the special deduction for long-term possession of the existing house may be applied from the date of acquisition to the date of transfer.

Articles 89 subparag. 3 and 95 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005); Articles 154, 155(16) (see current Article 15(17) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 8705 of Feb. 19, 2005), 156, 159-2 subparag. 2 ( Deletion), and 160 of the former Enforcement Decree of the Income Tax Act

Supreme Court Decision 93Nu17324 delivered on March 8, 1994 (Gong1994Sang, 1214) Supreme Court Decision 98Du3051 Delivered on December 10, 1999 (Gong2000Sang, 233) Supreme Court Decision 2004Du9456 Delivered on March 11, 2005 (Gong2005Sang, 607)

Plaintiff (Law Firm Deputy, Attorneys Ahn Byung-jin et al., Counsel for the plaintiff-appellant)

Chuncheon Director of the Tax Office

Seoul High Court Decision 2006Nu2406 delivered on October 13, 2006

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

In light of the purport of Articles 89 subparag. 3 and 95 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005), Articles 154, 155(16), 156, 159-2 subparag. 2 and 160 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 8705 of Feb. 19, 2005; hereinafter “Enforcement Decree”), where a member of a reconstruction association transfers a status (right of sale) acquired through the association as occupant through the association to provide the existing house and land to the reconstruction association and to the date of sale of the existing house to the date of sale, it is reasonable to apply special deduction for sale from the date of acquisition of the existing house to the date of sale of the existing house as prescribed in Article 154(1) of the Enforcement Decree, notwithstanding that the right to sale falls under the “right to acquire the real estate,” and the area of the existing house to be acquired as a long-term house holding area exceeding 361.4.5 billion won.

In full view of the relevant evidence, the court below acknowledged that when the rebuilding project plan was approved on April 28, 2001, when the plaintiff acquired an existing house (exclusive area of 94.91 square meters) and resided on October 8, 1992, he provided the reconstruction association with the housing reconstruction association on August 11, 2001 and entered into a supply contract with the housing reconstruction association and the housing for sale (exclusive area of 161.47 square meters) on April 20, 2004, he transferred the instant housing ownership amounting to 1.85 billion won to the Seoul M&C Co., Ltd. on April 20, 2004. The court below determined that the special deduction for long-term possession was legitimate, as the housing ownership right of this case constitutes a high-priced house deemed as one house for one household, and that the period of possession is more than 10 years, and thus, it did not err in the misapprehension of legal principles or the principle of no taxation without law as alleged in the grounds of appeal.

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 Kim Hwang-sik (Presiding Justice)