Calculation of depreciation amounts and capital gains from a real estate rental business;

In the income tax that is based on the tax return method in principle, as long as the depreciation costs are appropriated as necessary expenses in calculating the income amount of the real estate rental business according to the taxpayer's own judgment, it is reasonable to deduct them in calculating the acquisition value for calculating the capital gains pursuant to Article 97

Value-added Tax

2014Gudan10636 Disposition of revoking capital gains tax

JO

O Head of tax office

June 2, 2015

June 30, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of KRW 000 of the transfer income tax for the year 201, which the Plaintiff rendered on October 1, 2013, is revoked (it appears that October 14, 2013, which is the date of disposition of the complaint’s claim, appears to be written in writing on October 1, 2013).

1. Details of the disposition;

(a) A final return on tax base of real estate acquisition and tax base;

On June 10, 2005, the Plaintiff acquired DSS-3 land and its ground building (hereinafter referred to as “instant real estate”) from AAA Si DD, 709-3 land and its ground building (hereinafter referred to as “the instant real estate”). On June 10, 2005, the Plaintiff reported real estate rental income for the instant real estate by appropriating the total depreciation cost of the instant real estate as indicated below at the time of filing a final return on tax base of global income accrued from 2005 to 2007 (=00 won +00 won + 000 won; hereinafter referred to as “instant depreciation cost”).

(b) Provisional return and payment of tax base of transfer income;

On November 18, 2011, the Plaintiff transferred the instant real estate to the Defendant on January 13, 201, and on January 13, 2012, the transfer value of the instant real estate was KRW 000, and KRW 200,00,000,000 for the transfer income tax of the year 201.

C. The defendant's disposition of increase or correction

On October 1, 2013, the Defendant issued a correction and notification of the increase in capital gains tax of 000 won (including additional tax) accrued in 2011 on the Plaintiff (hereinafter referred to as “instant disposition”) by making the depreciation cost of this case, which was appropriated as the necessary expenses for real estate rental income, at the time of filing a final report on the tax base of global income accrued from 2005 to 2007, as the acquisition value, after deducting the depreciation cost of this case from the above acquisition value (=00 won -00 won).

(d) Procedures of the previous trial; and

On June 2, 2014, the Plaintiff filed an appeal with the Tax Tribunal on June 2, 2014, but was dismissed on August 26, 2014.

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

2. Whether the disposition is lawful;

A. The plaintiff's assertion

In the instant case, it was true that the Plaintiff appropriated the depreciation costs of the instant real estate, which is the leased object at the time of reporting the real estate rental income for the year 2005 to 2007, as the necessary expenses. However, the instant real estate acquired and sold the instant real estate to the time of commencing the leasing business, and the loss brought forward in excess of the depreciation costs

Article 97 (3) of the former Income Tax Act (amended by Act No. 10789, Jun. 7, 2011; hereinafter the same) shall not apply to a private entrepreneur, in light of the following: (a) deducts the depreciation cost from the acquisition value of transfer income tax only for depreciation costs having a substantial reduction effect in calculating real income amount; (b) deducts the carried-over loss from other fields even if a corporation transfers a building; and (c) deducts the carried-over loss from the liquidation income in calculating liquidation income even if a corporation is dissolved, the depreciation cost is ultimately deducted; (d) in the case of a private entrepreneur, there is no opportunity for such deduction; and (e) cause a tax-oriented imbalance due to the absence of such opportunity; and (e) ultimately, the Defendant’s disposition of this case is a disposition that is friendly for the convenience of tax administration by impairing the Plaintiff’s trust and predictability on the legitimacy of the voluntary tax payment under tax-related Acts and subordinate statutes.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

Article 97 (3) of the former Income Tax Act provides that the acquisition value shall be the depreciation costs of the assets during the period of transfer holding, and the amount which has been or is to be included in the necessary expenses in calculating the real estate rental income or business income for each year shall be the acquisition value after deducting such amount from the amount of acquisition value, capital expenditure, transfer expenses, etc

In the case of business assets, the purpose of legislation and language of the above provision excluding double deduction, the principle of no taxation without the law, or the interpretation of tax laws and regulations is interpreted as the law, barring special circumstances (see Supreme Court Decision 2002Du9537, Jan. 24, 2003). Depreciation costs can be selected within the scope of depreciation and amount within the scope of depreciation, and necessary expenses can be included only when necessary expenses are included in the settlement of accounts. On the other hand, undeductible depreciation costs that are not included in the necessary expenses can be counted from the transfer income if they are included in the necessary expenses. Thus, it is difficult for a business operator to choose the deduction portion of the income tax among the transfer income and the transfer income tax. The inclusion of depreciation costs in deductible expenses cannot be concluded as necessary expenses by tax adjustment because it is difficult for a business operator to arbitrarily calculate the depreciation costs or revised tax return because it is difficult for him/her to calculate the depreciation costs in the first time because it is difficult for the business operator to calculate the amount of loss carried forward after deducting the depreciation costs from the taxable expenses.

Therefore, the defendant's disposition of this case on the same premise is legitimate.

3. Conclusion

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