Cho High Court Decision 2008Du3659 ( August 14, 2009)

If the acquisition value is not confirmed, it shall be determined by estimation.

Because the acquisition value is not confirmed, it is to calculate the gains on transfer by converting the acquisition value.

The contents of the decision shall be the same as attached.

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

The part of the Defendant’s imposition of capital gains tax of KRW 231,619,910 for the Plaintiff on July 14, 2008, which exceeds KRW 172,195,794, among the imposition disposition of KRW 231,619,910 for the Plaintiff, shall be revoked

1. Circumstances of the disposition;

A. On April 26, 1989, the Plaintiff acquired and owned 3,554 square meters (hereinafter “instant land”) located in an area designated for speculation under Article 94(1)6-2 of the former Income Tax Act (amended by Act No. 7857, Dec. 31, 2005; hereinafter the same) and transferred 752,50,000 won to the Defendant, other than SongCC, even though the Plaintiff transferred the instant land, it did not report and pay the transfer income tax to the Defendant.

B. Accordingly, in relation to the transfer of the instant land, the Defendant: ① recognized the transfer value as the actual transaction value (752,50,000 won) pursuant to the proviso of Article 96(1) and subparagraph 6-2 of the former Income Tax Act; ② as the conversion value (63,483,630 won) pursuant to Article 97(1)1(c) of the former Income Tax Act in order to have no actual acquisition value confirmed as a result of the investigation, the estimated deduction amount as the estimated deduction amount pursuant to Article 97(3)2 of the former Income Tax Act and Article 97(3)1 of the former Enforcement Decree of Income Tax Act (amended by Presidential Decree No. 21301, Feb. 4, 2009; hereinafter the same) and imposed KRW 1,08,370 as the estimated deduction amount pursuant to Article 163(6)1 of the former Enforcement Decree of Income Tax Act, and on July 14, 2008, imposed the Plaintiff KRW 2319,910.

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

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The instant land was offered as collateral to secure the Plaintiff’s obligation to the (joint) △△, the husband of the Yellow City, as the representative member. The total amount of loans (Joint) lent to △△ up to April 26, 1989, which the Plaintiff acquired by payment in lieu of the instant land, was KRW 70,282,701, and thus, the acquisition value of the instant land was KRW 70,282,701.

(2) Of the necessary expenses concerning the instant land, KRW 151,650,000 (i.e., costs of lawsuit 56,950,000 + Costs of KRW 94,700,000 incurred for convenient use of the instant land) and KRW 6,700,000, respectively, shall be deducted in calculating gains on transfer, in calculating gains on transfer.

(3) Therefore, since the acquisition value of the instant land is KRW 70,282,701, capital expenditure is KRW 151,650,00, and transfer cost is KRW 6,700,00, the part of the Defendant’s disposition that exceeds KRW 172,195,794 is unlawful.

B. Relevant statutes

It shall be as shown in the attached Form.

C. Determination

(1) The fact that the Plaintiff was unable to verify the actual transaction value at the time of acquiring the instant land is as seen above (the Plaintiff claimed that the acquisition value of the instant land was KRW 70,282,701, and submitted as evidence the evidence that the Plaintiff was KRW 3,482,70, and that each of the evidence was insufficient to confirm the acquisition value of the instant land based on each of the following facts. Therefore, it is lawful for the Defendant to calculate the acquisition value of the instant land by the conversion price (63,483,630) pursuant to Article 97(1)1 (c) of the former Income Tax Act (in the case of the instant land, there was no transaction example or appraisal value, and thus, it is bound to follow the conversion price).

(2) Meanwhile, pursuant to Article 97(3)2 of the former Income Tax Act, necessary expenses recognized in calculating gains on transfer are only recognized as an estimated deduction amount (1,088,370 won) calculated pursuant to Article 97(3)2 of the former Income Tax Act and Article 163(6)1 of the former Enforcement Decree of the Income Tax Act. Therefore, the amount of capital expenditure, transfer expenses, etc. claimed by the Plaintiff cannot be deducted as necessary expenses, regardless of whether it is deemed capital expenditure or transfer expenses prescribed by relevant statutes.

(3) Ultimately, the Plaintiff’s assertion is without merit, and the Defendant’s instant disposition is lawful.

3.In conclusion

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