National High Court Decision 2007Du1163 ( October 11, 2007)

The propriety of a disposition taking the conversion acquisition value into consideration as it is deemed unclear;

Since evidential documents submitted are not the evidential documents such as a sales contract or receipt necessary to confirm the actual transaction price at the time of acquisition, so it is deemed impossible to verify the actual acquisition price, the conversion acquisition price shall be applied.

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

Article 96 (Transfer Price)

Article 97 (Calculation of Necessary Expenses for Transfer Income Tax)

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

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

The imposition of capital gains tax of KRW 48,797,050 on the Plaintiff on January 7, 2007 shall be revoked.

1. Details of the disposition;

A. On February 20, 1990, the Plaintiff purchased and owned the instant real estate from Nonparty 173-O 173-O 795 square meters, 174-O 418 square meters, 171-O 26 square meters of miscellaneous land (hereinafter “○○○-O 173- 795 square meters and 174-O 418 square meters of miscellaneous land”) from Nonparty 1, 1990, and owned it, and transferred the instant real estate to Nonparty 1, 200,000 on August 16, 2006.

B. On October 31, 2006, the Plaintiff made a preliminary return of tax base of capital gains tax on the premise that the transfer value and acquisition value of the instant real estate are 360,000,000 won, and the acquisition value is 176,22,214 [=180,000,000 x (795+418 + 26) / (795+418 + 26)] calculated according to the size ratio under the premise that the Plaintiff purchased the instant real estate and the instant real estate in total amount of KRW 180,00,000,000. Accordingly, the Plaintiff reported and paid capital gains tax of KRW 14,86,902.

C. On January 7, 2007, the Defendant recognized that the actual transaction price reported by the Plaintiff was appropriate, but the acquisition price of the instant real estate constitutes a case in which the actual transaction price at the time of acquisition of the instant real estate cannot be recognized or confirmed. However, the Defendant issued the instant disposition to determine and notify the Plaintiff of capital gains tax of KRW 48,797,050 on the ground that it constitutes a case in which the actual transaction price at the time of acquisition of the instant real estate was not recognized or confirmed. Article 114(5) of the former Income Tax Act (amended by Act No. 8144, Dec. 30, 2006; hereinafter “former Income Tax Act”) and Article 176-2(1), (2)2, and (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618, Feb. 22, 2008; hereinafter “former Enforcement Decree of the Income Tax Act”).

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

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The Plaintiff acquired the instant real estate and Nonparty’s real estate in KRW 180,000,000, and submitted documentary evidence. Nevertheless, the Defendant’s disposition of this case by applying the acquisition price converted on the ground that the actual transaction price at the time of the acquisition of the instant real estate constitutes a case where it is impossible to recognize or confirm.

(b) Related statutes;

Article 96 (Transfer Price)

Article 97 (Calculation of Necessary Expenses for Transfer Income Tax)

C. Determination

(1) Under the former Income Tax Act and the former Enforcement Decree of the Income Tax Act, which was enforced at the time of the transfer of the real estate in this case, gains from the transfer of land should be calculated on the basis of the standard market price. However, in exceptional cases such as where the transferor files a return on the basis of the actual transaction price along with evidential documents within the period of final return, etc., gains from the transfer shall be calculated on the basis of the actual transaction price (main sentence and proviso of Article 96(1)6 and Article 97(1)1 (a) of the former Income Tax Act), and in cases where there are omissions or errors in the details of preliminary or final return on the tax base of transfer income, the tax authority may rectify the transfer income tax base and the tax amount if the acquisition price is based on the actual transaction price, and where it is impossible to recognize or confirm the actual transaction price at the time of the transfer or acquisition due to lack of books, sales contract, receipt, and other evidential documents necessary to confirm the actual transaction price at the time of the transfer or acquisition, the acquisition price shall be corrected in sequence (Article 1114(2 and

(2) In full view of the statements in subparagraphs 5-1 and 2 and the purport of the entire pleadings in the testimony of the witness ○○○○○, the Plaintiff submitted a transaction confirmation (No. 5-1) and a certificate of personal seal impression (No. 5-2) to the effect that the Plaintiff acquired the real estate in this case and the real estate in this case in the preliminary return of tax base of transfer income on October 31, 2006 and the real estate in this case in the preliminary return of tax base of transfer income, and it can be recognized that the Plaintiff testified to the same effect after the instant lawsuit was filed. However, each of the above evidence does not constitute evidentiary documents such as books, sales contract, receipt, etc. necessary to verify the actual transaction amount at the time of the acquisition, and each of the above evidence alone does not seem to be able to recognize or confirm the actual transaction value at the time of acquisition as KRW 180,000,000,0000. Thus, the Defendant’s disposal of the real estate in this case can not be applied in the same way.

3. Conclusion

Thus, the plaintiff's claim of this case seeking the cancellation of the disposition of this case cannot be accepted and dismissed.