Cho-2017-Gu-1359 ( December 06, 2017)

Those including facility expenses and other premiums, etc. in the transfer value are legitimate;

Since facility expenses, other premiums, etc. are more characteristics than the price for facility expenses, it is reasonable to include and determine the premium in the transfer value.

Article 94 of the Income Tax Act: Scope of Transfer Income

Daegu District Court 2018Guhap20742

○ Kim

○ Head of tax office

September 12, 2018

October 12, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of capital gains tax of KRW 91,703,077 (including additional tax) for the year 2014 against the Plaintiff on August 1, 2016 shall be revoked.

1. Details of the disposition;

(a) Acquisition of child-care centers and playgrounds by the plaintiff;

1) On December 4, 200, the Plaintiff purchased a building of 322m2 square meters and its ground from Friju ** Si* * Dong (hereinafter referred to as “** Dong”) and operated a childcare center under the trade name called “AAAAAAA childcare center” at that place.

2) In addition, on December 13, 2005, the Plaintiff purchased 1/2 shares of ECC and ED on December 13, 2005 ** 900 m2 shares of each 1/2 shares, and installed and operated a playground at the same place (hereinafter collectively referred to as “the instant real estate” and “child care center” and “balls,” respectively).

3) After January 18, 201, the Plaintiff purchased 1/2 shares of the said playground from KimB.

(b) Transfer of a child-care center or playground by the plaintiff;

1) In around 2008, the Plaintiff made an oral agreement to transfer the instant real estate to E and MaximumF (hereinafter “AE”) who is a married couple, but there was an opinion about the specific transfer amount, etc.

2) On January 28, 2014, the transferee filed a lawsuit against the Plaintiff claiming the implementation of the procedure for ownership transfer registration against the instant real estate in Daegu District Court*** branch court (2014Gahap***).

3) On August 26, 2014, when the said lawsuit was pending, conciliation was concluded between the Plaintiff and the assignee with the following contents (hereinafter “instant conciliation”).

1. The transferee shall pay 392,009,690 won to the Plaintiff by September 30, 2014, and if it is not paid by the above deadline, the transferee shall pay the remainder with interest calculated at the rate of 20% per annum from the following day to the date of full payment.

2. At the same time, the Plaintiff received the money set forth in paragraph 1 and conducted the procedure for the registration of cancellation of the registration of the establishment of a neighboring mortgage received as the Daegu District Court** on the playground* on April 25, 2012, by April 25, 2012. (b) the Daegu District Court** the Daegu District Court on the childcare center* the procedure for the registration of cancellation of the establishment of a neighboring mortgage received as the No. 57044 on December 11, 2000. (c) the procedure for the registration of cancellation of the establishment of a neighboring mortgage received as the sale on September 30, 2014 is carried out. (d) the procedure for the registration of ownership transfer for the instant real estate was carried out.* the procedure for the change of the ownership registration for the site of a ditch play facility **** the procedure for the change of the ownership of land obtained from

3. Where the Plaintiff received the money set forth in paragraph (1) and fails to perform the obligation set forth in paragraph (2), the amount calculated by the rate of KRW 200,000 per day from the date of receiving the money set forth in paragraph (1) to the time of performing the said obligation in full shall

4. The plaintiff and the transferee confirm that they entered into a contract with the land price of KRW 50 million, facility cost, and other premiums, etc. of KRW 200 million, and with regard to the sale and purchase of playgrounds, the land price of KRW 50 million, KRW 55 million, other fees, etc.

5. The assignee waives the remainder of the claim. The Plaintiff and the assignee confirm that there is no remainder of the obligation except the money set forth in paragraph 1 with respect to the sale and purchase of the instant real estate.

C. Defendant’s imposition of capital gains tax

1) On September 30, 2014, the transferee paid KRW 392,009,690 to the Plaintiff on September 30, 2014, and registered the ownership transfer of the instant real estate.

2) On October 30, 2014, the Plaintiff reported and paid capital gains tax of KRW 1,147,49 to the Defendant by calculating the transfer value of the instant real estate as KRW 550 million, KRW 432,587,032, and necessary expenses as KRW 100,062,972.

3) On April 18, 2016, the Defendant conducted a tax investigation with respect to the Plaintiff from April 18, 2016 to December 29, 2016, and on August 1, 2016, the Plaintiff recognized the Plaintiff as the transfer value totaling KRW 925 million (=child care center KRW 700 million + playground KRW 225 million). The Defendant corrected and notified the transfer income tax amount KRW 117,524,670 (including additional tax).

4) On October 31, 2016, the Plaintiff filed an objection with the Director of the Regional Tax Office against the said disposition. On December 20, 2016, the Director of the Regional Tax Office rendered a decision citing part of the Plaintiff’s objection as follows.

1. The transfer value of the playground shall be deducted from the original 22.5 billion won, which is entered as the facility cost of the playground in paragraph (4) of the instant conciliation at the cost of the playground.

2. In the calculation of gains on transfer of the instant real estate, the value-added tax on the price of interior construction work shall be additionally deducted as necessary expenses, and the tax base and amount of tax shall be corrected accordingly.

3. The plaintiff's remaining claims are dismissed.

5) Accordingly, around January 5, 2017, the Defendant calculated the transfer value of the instant real estate as KRW 870 million, the acquisition value as KRW 432,587,032, and necessary expenses as KRW 110,062,972, and notified the Plaintiff of the correction and notification of capital gains tax (including additional tax) (hereinafter Defendant’s disposition on August 1, 2016, the remaining part of the disposition that was reduced as above is referred to as “the instant disposition”).

(d) Procedures of the previous trial; and

On March 20, 2017, the Plaintiff filed an appeal with the Tax Tribunal on March 20, 2017, but the appeal was dismissed on March 5, 2018.

Facts that there is no dispute over recognition, the purport of the whole pleading.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The transfer value of the real estate of this case shall be KRW 500,000,000 for the land and building of the childcare center.

The sum of KRW 50 million is KRW 50 million, and the remainder of KRW 320 million (= KRW 870 million – KRW 550 million) does not constitute capital gains under Article 94(1) of the Income Tax Act (amended by Act No. 12852, Dec. 23, 2014; hereinafter the same shall apply) such as teaching equipment, teaching materials, fixtures, equipment, and facilities. Nevertheless, the Defendant erroneously calculated the transfer value of the instant real estate as KRW 870 million and issued the instant disposition. Accordingly, the instant disposition should be revoked as it is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

In full view of each of the above evidence, evidence Nos. 1 to 6, and evidence Nos. 1 to 6 (including each of the above numbers), the following facts are recognized:

1) The status of the business registration for AA Child Care Centers is as follows:

Trade name business classification, representative, opening date and closing date of business

AAA Child Care Center exemption Plaintiffs, May 3, 1996, July 6, 1999

on March 28, 191, 1993

Tax-free maximumF201 November 25, 2010

2) The result of the tax investigation conducted by the Defendant against the Plaintiff is as follows.

○ Details of the transferred real estate

Child care centers: Housing site 322.00 square meters, building 489.77 square meters, transfer on September 30, 2014, and acquisition on December 4, 200

Polter: Acquisition on September 30, 201, by transfer, September 13, 2005 (1/2 equity), on December 13, 2005, on January 18, 2011 (1/2 equity)

○ Details of investigation of transfer value

- The amount agreed upon in the instant conciliation, i.e., KRW 925 million. The value of equipment, such as teaching materials, should be excluded from the transfer value. However, as the Plaintiff’s confirmation document, there is no fact in writing regarding equipment, etc. at the time of the real estate sales contract, such as item, acquisition time, acquisition value, etc., and thus, it is unclear that the distinction between the teaching equipment and the non-product

- Facility cost of 55 million won related to playgrounds is an essential place for the operation of a childcare center and must be installed under the Infant Care Act. Thus, it constitutes an essential structure of a building in accordance with Article 94(1) of the Income Tax Act. Therefore, the above amount should also be included in the transfer value.

- Other fee of KRW 120 million in relation to playgrounds is stipulated in the contract to be paid monthly in consideration of the economic burden of the assignee in accordance with the sales contract proposed by the Plaintiff, so that it shall be included in the transfer value.

○ Details of necessary expenses investigation

- Since the construction details and construction amount are confirmed in accordance with the indoor construction contract document submitted at the time of filing a transfer income tax report, the necessary expenses are deemed appropriate.

3) The main contents of documentary evidence submitted by the Plaintiff to the Defendant at the time of the investigation are as follows.

A) Written confirmation prepared by the Plaintiff on April 29, 2016

On April 208, 2008, the Plaintiff made an oral contract to sell and purchase a child-care center and playground to a police officer, and around May of the year, transferred the name of a child-care center to E, and transferred the child-care center to E.

After ○, on August 2010, the Plaintiff agreed to sell a child-care center and play room in total amount of KRW 925 million. Of them, KRW 700 million (acquisition of KRW 260 million) is deemed to have been completed, and a sales contract for the rest of KRW 225 million was made.

At the time of the preparation of the sales contract, a detailed list of the goods and facility costs, excluding land and buildings, was not prepared, and there was no fact that the plaintiff prepared and kept the list of the facilities and goods during the period of operation of the child care center.

The ○○ transfer proceeds received KRW 140 million on April 28, 2008, and thereafter received KRW 392,90,310 on several occasions until August 18, 2014. According to the instant adjustment, the payment of KRW 392,09,690 on September 30, 2014 and received KRW 92,500 million on total transfer proceeds, and transferred ownership to the transferee on September 30, 2014.

B) 'Real Estate Sale and Use Contract' prepared by the Plaintiff and the assignee on August 16, 2010 (No. 4)

The main contents of the evidence 2) are as follows:

1. Indication of real estate and play grounds for AAA child care centers (including user fees);

Location:** Dong 900 Sheet (all play equipment and emergency escape chlocks)

2. Details of the contract;

Article 2. The buyer shall pay the purchase price as follows in the above real estate:

- Sales proceeds: 25,000,000 won

- Monthly payments: 60 months per month, 16 months per month;

- Balance: 75,00,000 won shall be paid on the date of July 16, 2015 prior to the date of registration.

* Special Terms and Conditions

1. The above purchase price is the amount which includes the following, and the seller and the buyer shall faithfully perform:

(a) All play equipment in child-care centers (** Dong 900) and emergency escape drums;

(b) Child-care center play (** Dong 900) price and method of paying user fees for five years;

- From August 2010 to July 2015, KRW 2.5 million per month shall be deposited into the designated account on the 16th day of each month, and from July 16, 2015, the buyer shall pay the seller KRW 75 million at the same time before the registration until July 16, 2015 (in addition, KRW 17% at the time of delayed payment in one month, KRW 225 million shall be paid at the time of delinquency in payment for at least three months).

C) Within the main text of the Agreement (No. 4-3) signed by the Plaintiff and the transferee on August 16, 2010.

The use shall be as follows:

1. It shall complete the registration of the relocation of the building or land of a child-care center and the change of the name of the representative of the child-care center, and shall cooperate with each other so that various procedures can be promptly conducted;

2. The purchase price for the playground shall be KRW 25 million in total, and KRW 150 million in total shall be paid in 60,000 in monthly installments for 2.5 billion in total and shall be paid in addition to the balance KRW 75,000 in total at the time of the transfer registration.

D) Accordingly, the transferee paid the Plaintiff KRW 1,500,000 to KRW 2.5 million per month from March 18, 2011 to August 18, 2014, and ② On August 26, 2014, upon the instant mediation was concluded, the transferee paid KRW 392,009,690 to the Plaintiff on September 30, 2014 after settling all of the sales amount related to childcare centers and playgrounds.

4) In the process of filing an objection, the Plaintiff asserted that the head of GG Regional Tax Office transferred the teaching tools and equipment necessary for the operation of the childcare center to the transferee as follows.

Where it is necessary for the operation of child-care centers, such as CCTV, 9 pianos, heating apparatus, air conditioners, television, video, audio equipment, sn beam beam project, indoor and outside walls, air conditioners, washing machines, washing machines, air conditioners, air conditioners, washing machines, air conditioners, air conditioners, lags, sterilizations, sterilizations, singing-making machines, water purifiers, and line winders, and for the operation of child-care centers, such as air conditioners, liftss, worgs, guard books, school equipment, play equipment, etc.

5) As a result of a field investigation by a public official in charge of GG regional tax offices in the process of raising an objection, the list of school equipment, fixtures, facilities, etc. remaining in a childcare center around December 14, 2016 is as follows:

Dri beam beamline projects, various enjoyes, world flag and related teaching equipment, meals disinfection equipment, outdoor slocks, emergency exits, core boilers, urban gas

6) The transferee stated that the public official in charge of the said GG regional tax office acquired the Montreal et al., other than the Plaintiff’s equipment, fixtures, and facilities, but discarded it, and then used it after taking over the books, teaching equipment, home appliances, etc. on the books of young children, teaching equipment, and home appliances, and then discarded it to the old age.

D. Determination on the issues

1) Organization of issues

According to the above facts and the Plaintiff’s assertion, there is no dispute between the parties as to the fact that the sum of KRW 550 million in the purchase price of the land and building in the childcare center and playground (=50 million in the purchase price of the land and building in the childcare center + KRW 50 million in the purchase price of the land in the playground) is included in the purchase price of the real estate in this case. Therefore, the issue of this case is whether ① 200 million in terms of the facility cost and other premium in relation to the childcare center is included in the purchase price of the real estate in this case, ② ’other fee of KRW 120 million in relation to the playground’ is included in the sale price of the real estate in this case.

2) As to 200 million won including facility costs and other premium

A) Comprehensively taking into account the facts recognized as above (c) and the purport of the entire pleadings, it is reasonable to view that “facility costs and other premiums, etc.” constitute “business rights” under Article 94(1)4 of the Income Tax Act in consideration of the comprehensive rights necessary for the operation of the childcare center, excluding the land and building prices of the childcare center. Therefore, it is lawful to impose capital gains tax on the Plaintiff including the “facility costs and other premiums, etc.” 200 million won in the transfer value of the instant real estate. Ultimately, this part of the Plaintiff’s assertion is without merit.

(1) According to Article 94(1)1 and 4(1) of the Income Tax Act, capital gains include income generated from transfer of each of the following income generated in the pertinent taxable period, namely, (i) land (referring to land category to be registered in the cadastral record under the Act on Land Survey, Waterway Survey and Cadastral Records) or a building (including facilities and structures annexed to a building) or fixed property for business (including the right to acquire a building and its appurtenant land), superficies, right to lease on a deposit basis, and right to lease on a deposit basis, if a building is completed), which are transferred along with fixed property for business (including the right to acquire a building and its appurtenant land), as well as the right to operate a business (including the right to operate a business recognized as transferred as being included in the assets according to generally accepted social norms, but the economic benefits derived from obtaining authorization, permission, license, etc. from an administrative agency). Comprehensively considering the language, content, form, and system of the pertinent provision, income generated from transfer of land and buildings (including facilities and structures annexed to a building) and right to operate a business.

D. The instant conciliation paragraph 4 provides that “The Plaintiff and the transferee shall confirm that .... the facility costs and other premiums are KRW 200 million in connection with the sale and purchase of the instant childcare center.” However, in addition to 500 million in the land and building prices of the childcare center, “200 million won, such as facility costs and other premiums,” it is natural to regard the Plaintiff as the goodwill transferred along with the childcare center, which is KRW 200 million in total, including the premium due to the transfer of intangible property values, such as the equipment and improvement costs and the facilities and equipment attached to the childcare center, the facilities and equipment in the location of the childcare center, and the operation of the facilities and equipment, the credit, the management know-how, or the location and location of the childcare center, and other various tangible and intangible values, in view of the interpretation of the language and the concept of the general transaction.

As seen earlier, ① as a result of the public official in charge of GG regional tax office’s on-site investigation into child care centers in the course of filing an objection, it is true that on December 14, 2016, among various school equipment and fixtures, the Plaintiff claimed that he transferred them to the transferee, the sn beam beam project, various expansions, world flag and related teaching equipment, food disinfection equipment, heart boiler, city gas, such as urban gas, and ② the transferee acquired the said teaching equipment, equipment, and facilities as well as the above teaching equipment, equipment, and facilities, but the transferee took over the said equipment, equipment, and facilities, and then discarded them as old.”

㈎ 그러나 위 교구나 비품 및 시설물 중에서 심야 보일러, 도시가스와 같은 시설물은 이를 건물과 분리하는 것이 현저히 곤란하거나 이를 건물과 분리할 경우 그가치가 현저히 떨어지는 것이므로, 소득세법 제94조 제1항 제1호의 괄호 부분, 즉 '건물에 부속된 시설물'에 해당한다. 따라서 심야 보일러, 도시가스와 같은 시설물은 이 사건 부동산의 양도가액에 당연히 포함되어야 한다.

㈏ 그 밖에 빔 프로젝트, 각종 퍼즐, 세계 국기 및 관련 교구, 식기 소독기, 몬테소리ㆍ은물 교구, 유아책상, 교구장, 가전제품과 같은 교구나 비품의 경우에도 다음의 여러 사정을 종합하면, 이를 시설비 기타 권리금과 구별하여 별도로 그 가치를 인정할 만한 양도자산으로 보기는 어렵다.

① It is difficult to deem that there exists property value that should be separately considered at the time of the transfer, taking into account the following factors: (a) the amount of the said teaching instruments and fixtures is very low; (b) the amount was calculated by taking into account the depreciation due to the period of use from around 2000 to around 2001 after the acquisition (at least the time of acquisition to September 30, 201).

② The phrase under Paragraph (4) of the instant conciliation merely lists items with a large economic value, such as facility costs and other premiums, indicated as “200 million won, such as premium,” and does not include items with little economic value, such as teaching instruments and fixtures.

③ At the time of the transfer of the instant real estate, the Plaintiff did not prepare a detailed list of the goods or facility costs except for the land and buildings at the time of the transfer. Moreover, the Plaintiff did not have prepared a separate list of the goods or facility while operating the childcare center and strictly managed it.

④ If the Plaintiff and the assignee considered the foregoing teaching instruments and equipment as an important factor in calculating the amount of transfer by deeming them as a separate property-value subject matter, it would be consistent with the transactional practice and social norms to prepare a detailed list of such instruments and equipment and to provide a solution to cases where any defects are discovered in the future. In particular, considering that the Plaintiff and the assignee agreed to transfer the instant property for the first time around 2008, and there has been about six years and disputes between August 26, 2014 after the instant conciliation was made, the Plaintiff and the assignee did not prepare a list of the above teaching instruments and equipment, and only the same amount was transferred to childcare centers and playgrounds itself, and even in the instant conciliation, the above teaching instruments and equipment were not subject to interest, and thus, they did not separately enter the same in the adjustment clause.

In a lawsuit seeking the revocation of a tax imposing disposition, the taxation requirement must have the burden of proof against the imposing authority. However, if it is proved that the facts alleged in the facts of taxation requirements in light of the empirical rules in the course of a specific lawsuit are proved, it cannot be readily concluded that the other party is an illegal disposition that fails to meet the taxation requirement unless the other party proves that the facts in question are not subject to the empirical rules (see, e.g., Supreme Court Decision 202Du5351, Sept. 10, 2002).

However, in light of the aforementioned circumstances, it can be sufficiently seen that 200 million won, such as facility costs and other premiums, constitute capital gains under the Income Tax Act in light of the concept and experience of general transactions. Nevertheless, the Plaintiff merely claims that 200 million won, such as facility costs and other premiums, include the transfer amount of other assets in addition to the facility costs and other premiums, and in detail, did not claim and prove the transfer amount of certain assets at the price. Therefore, it cannot be readily concluded that the instant disposition is unlawful solely on the fact that a child care center’s teaching equipment and fixtures have been partially transferred to the transferee at the time of the transfer of the instant real estate.

3) As to “other fee of KRW 120 million” portion

The agreement on the sale and purchase of real estate prepared by the Plaintiff and the transferee on August 16, 2010 (No. 4-2 of the evidence No. 4-2) states that ① KRW 150 million out of the purchase price of KRW 225 million (=2.5 million x 60 months) shall be paid to the Plaintiff on the 16th day of each month by the transferee in installments for 60 million, and ② the remainder of KRW 75 million shall be paid simultaneously with the registration of the transfer of the ownership of the playground on July 16, 2015. In addition, the agreement (No. 4-3 of the evidence No. 4-2), prepared by the Plaintiff and the transferee on August 16, 2010, KRW 250 million out of the purchase price of KRW 150 million,000,000,000,0000,000,000 won, which is paid to the Plaintiff in installments for 2.1.5 million, respectively.

However, upon the completion of the instant adjustment on August 26, 2014, the Plaintiff and the transferee determined the sales amount related to the playground as KRW 150 million in total, KRW 55 million in land, ② facility cost KRW 55 million in total, ③ other usage fees, and KRW 225 million in total, and the transferee paid KRW 392,009,69, and 690 in total to the Plaintiff on September 30, 2014. In light of the developments leading up to the settlement of the sales amount, it is reasonable to view that in the instant adjustment, all of the remainder, excluding KRW 55 million in total, out of the sales amount finalized in relation to the playground, constitutes the sales amount of the playground.

Therefore, “other fee of KRW 120 million” is naturally included in the transfer value of the instant real estate, as income generated from the transfer of land or building under Article 94(1)1 of the Income Tax Act, which is naturally included in the transfer value of the instant real estate. Ultimately, there is no reason for the plaintiff to assert this part

3. Conclusion

Therefore, the plaintiff's claim is without merit, and it is so decided as per Disposition.