A. Whether an investment in kind in a cooperative of its members is a "transfer" which is a cause for taxation of capital gains tax (affirmative);

(b) Whether a disposition imposing capital gains tax on a person who has invested in kind in a company that newly constructs and sells a tenement house can be imposed double taxation (negative)

A. A partnership is established when two or more persons agree to operate a joint business by investing in one another, and all the partners assume the duty of investment stipulated in the partnership agreement and all the partners make investments in the partnership agreement shall become partnership property, and the investors shall become partnership property and acquire the status of partnership member in return for such investment. Thus, an investment in kind of assets to the partnership constitutes a transfer that is a taxable cause of capital gains tax due to a commercial transfer of assets stipulated in Article 4(3) of the

B. Since a business that newly constructs a tenement house and sells it in lots falls under a construction business under the Income Tax Act, the profit from such business is calculated on the basis of the purchase price of raw materials under the former part of Article 60(1)1 of the Enforcement Decree of the Income Tax Act and the asset value at the time of the investment in the partnership corresponding to the incidental expenses. Therefore, the transfer income accrued by a person who has invested in the partnership is deducted as necessary expenses in calculating the business income of the partnership, so the transfer income tax and the business income tax borne by the partnership shall not be double taxation.

(a) Article 4 of the Income Tax Act; Articles 7 and 31 of the Income Tax Act; Article 60 (1) 1 of the Enforcement Decree of the same Act;

A. Supreme Court Decision 84Nu392 delivered on December 26, 1984; Ga. Supreme Court Decision 84Nu549 delivered on February 13, 1985

Plaintiff

Head of Seogsan Tax Office

Daegu High Court Decision 83Gu347 delivered on July 3, 1984

The judgment below is reversed and the case is remanded to the Daegu High Court.

The grounds of appeal Nos. 1, 2 and 3 of the defendant litigation performer shall be collected together.

According to the reasoning of the judgment below, the court below acknowledged the transfer income tax of this case on June 5, 1979 and 440 square meters in Seo-gu, Busan Special Metropolitan City ( Address 1 omitted), and concluded a partnership agreement with the Plaintiff to newly construct a apartment house on the ground of 826 square meters in 197 square meters ( Address 2 omitted), and held that the land is jointly owned by the above partners, who are members of the partnership formed under the above partnership agreement, and the remaining 6/7 percent of the Plaintiff's share is transferred to 6 persons such as the above non-party, etc., so it cannot be viewed that the transfer income tax of this case should be arbitrarily transferred to the association members beyond the control of the transferor, and the transfer of the property which becomes the cause of taxation of the transfer income tax should not be regarded as transfer of the property to the association without the consent of all members of the association, and it should be viewed as transfer of the property to the association without the consent of all members of the association, as well as transfer of the property to the association.

However, a partnership is established when two or more persons agree to operate a joint business by investing in the partnership agreement. All partners bear the duty of investment under the partnership agreement, and each partner bears the duty of investment, and all kinds of assets invested by the partners become partnership property, and investors acquire the status of partner in return for such investment. Thus, an investment in kind in the partnership's assets constitutes a transfer that is a taxable cause of capital gains tax due to a commercial transfer of assets under Article 4 (3) of the Act on the Promotion of Real Estate Transactions (see Supreme Court Decision 84Nu392 delivered on December 26, 1984). It cannot be said that the transfer of assets is not a transfer of assets solely on the ground that the partners' use of and profit from the partnership's assets

Meanwhile, as in the case of this case, a business that newly constructs a row house and sells it in lots constitutes a construction business under the Income Tax Act and is subject to business income tax, but the necessary expenses for its business income are calculated based on the purchase price of raw materials under the former part of Article 60(1)1 of the Enforcement Decree of the Income Tax Act and the asset value at the time of the investment in the cooperative corresponding to the incidental expenses. As such, since the Plaintiff who invested in the cooperative is deducted as necessary expenses for calculating the business income of the cooperative, the transfer income tax to be borne by this investor and the business income tax borne by the cooperative

Therefore, the judgment of the court below that held that the Plaintiff’s land investment cannot be deemed as transfer of assets, and only in this case, it is subject to business income tax, and it cannot avoid reversal because it erred by misunderstanding the legal principles on transfer of assets, etc., and thus, the judgment of the court below is reversed, and it is so decided as per Disposition by the assent of all participating judges who reviewed the case to return to the Daegu High Court for further proceedings consistent with this Opinion.

Justices Lee Chang-chul (Presiding Justice)