Disposition to impose global income tax.

Whether a new house transfer constitutes a construction business that is the taxation requirement of global income tax and value-added tax shall be determined according to social norms by taking into account the following factors: (a) the new house transfer for the purpose of profit-making; and (b) the size, frequency, mode, etc. of the new house’s business activities

Article 19 of the Income Tax Act

1. All of the plaintiff's claims are dismissed.

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

The Defendant’s imposition of global income tax of KRW 85,197,340 for the year 2001 and value-added tax of KRW 35,924,40 for the second period of 2001 shall be revoked.

1. Details of the disposition;

A. On June 20, 2001, the Plaintiff newly constructed a building of 3 floors and 541.35 square meters of the total floor area (one household) on such ground by taking into account the land located in ○○○○-si on June 20, 201, and entered into a sales contract to sell the above land and buildings (hereinafter “the instant real estate”) between Kim○-○, Lee○-○ and Lee○-○ on October 23, 2001, and completed the registration of ownership transfer on the said land under the name of the above Kim○-○, etc. on November 1, 2001, and completed the registration of ownership transfer on the said building under the name of the above Kim○-○, etc. on November 20, 201.

B. On August 1, 2004, the Defendant: (a) deemed that the Plaintiff had conducted a field investigation on income tax; (b) notified the Plaintiff that the amount of land acquisition value, construction cost, acquisition tax, and registration tax should be deducted as necessary expenses from the transfer value of real estate of this case; and (c) on August 1, 2004, the Plaintiff would be subject to value-added tax on the transfer of the commercial portion among the real estate of this case and pay KRW 35,924,400, respectively, on the same day (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence 1 through 3, Gap evidence 4-1, 2, Eul evidence 1, 2, 4, and 5-1, 2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The Plaintiff acquired the instant real estate in order to build a new house for the Plaintiff’s family residing, and the Plaintiff did not operate the business, and was not a business operator since it did not sell the building by constructing a new building, and thus, the instant disposition that the Plaintiff deemed the Plaintiff to operate a new house is unlawful

(2) Even if the plaintiff is deemed as a business operator, the defendant did not fully deduct necessary expenses for acquiring the real estate of this case, and thus, the disposition of this case is unlawful.

B. Determination

(1) As to the allegation in paragraph (1)-1 of the above A

(A) Whether a new house transfer constitutes a construction business which is a taxation requirement for global income tax and value-added tax ought to be determined according to social norms by taking into account the following factors: (a) whether the new house transfer aims at profit and its size, frequency, mode, etc. to the extent that it can be seen as business activities in light of its size, mode, etc. (see Supreme Court Decision 97Nu10437, Mar. 27, 1998).

(B) If Eul evidence Nos. 2-2 and Eul evidence Nos. 3 and the purport of the whole pleadings is gathered, if the plaintiff's husband, Kim Jong-ok newly constructed a multi-family house on the ○○○○○○○○○○○○○○○○, ○○, ○○○○, and transferred it on October 10, 2002, the plaintiff newly constructed a multi-family house on the ○○○○○-○○○○○○○, ○○, and transferred it on July 31, 2003. The plaintiff can be recognized as having no record of residing in the real estate in this case. Further, as seen in the above paragraph 1-2, the size of the building newly built by the plaintiff, the size of the land located in the ○○○○, as seen in the above paragraph 1-20, and the plaintiff did not sell it on June 20, 201, and the plaintiff's allegation that it constitutes business income for the purpose of new construction and continuous transfer of the building.

(2) As to the allegation in paragraph (2) of the above A-2

(A) In a case where a tax assessment is conducted based on the on-site investigation decision, the taxpayer should assert and prove that the necessary expenses corresponding to the omitted portion exist (see Supreme Court Decision 2001Du4399, Mar. 11, 2003).

(B) The Plaintiff’s assertion on this part is without merit, since there is no evidence to support the existence of additional necessary expenses other than those acknowledged by the Defendant while rendering the instant disposition.

3. Conclusion

The plaintiff's claim is without merit.