Cho High Court Decision 201Do1159 (No. 23, 2011)

Where one house has been converted into an association member's relocation right in the status of possessing two houses, special cases of non-taxation shall not apply.

Special cases concerning non-taxation shall apply only where one household acquires an association member's relocation right in the possession of only one house and one association member's relocation right temporarily, and thus, special cases concerning non-taxation shall not apply to cases where one house is converted into an association member's relocation right in the possession of two houses.

Article 89 of the Income Tax Act

Article 156-2 of the Enforcement Decree of Income Tax Act

2011Gudan23453 Revocation of Disposition of Imposing capital gains tax

XX

Head of Eastern Tax Office

February 24, 2012

March 9, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 143,468,990 against the Plaintiff on January 8, 2011 is revoked.

1. Details of the disposition;

A. On November 15, 1996, the Plaintiff acquired and possessed a house for 000-00 concurrent use in Gangdong-gu Seoul Metropolitan Government (hereinafter “instant previous house”) and transferred it on December 28, 2009, and reported and paid KRW 21,858,450 of the transfer income tax for the year 2009 by applying the special long-term possession deduction for one house for one household after applying the special long-term possession deduction for one household.

B. The Defendant acquired the Plaintiff’s spouse’s previous house on May 18, 2007, 200-0 large 76 square meters and its ground-free house (hereinafter “house before redevelopment of this case”) on May 18, 2007, and notified the Plaintiff of the instant disposition of imposition of capital gains tax for the Plaintiff on January 8, 201 by excluding the special long-term possession deduction for one household, which was reported by the Plaintiff, under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter “Do Government Act”) on December 31, 2008.

[Ground of recognition] Facts without dispute, Eul evidence Nos. 1, 2, Eul evidence No. 2, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

1) Since the previous house before redevelopment was already destroyed on June 29, 2009, which was before the transfer of the previous house of this case, the transfer of the previous house of this case constitutes the transfer of one house by one household.

2) Even if the pre-development housing of this case was not destroyed on June 29, 2009, the association member's relocation right acquired by the Plaintiff's spouse does not constitute the conversion of the above house into the price for the ownership of the land, not the price for the above house that did not obtain any construction permit. Therefore, even though the Plaintiff had the right to occupy the association, the transfer of the previous house of this case constitutes one house per household.

3) The Plaintiff’s spouse acquired the association member’s relocation right on December 31, 2008 and transferred the previous house on December 28, 2009, two years after the Plaintiff’s spouse acquired the association member’s relocation right, thereby constituting the transfer of one house per one household under Article 156-2(3) of the Enforcement Decree of the Income Tax Act.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

Article 89(2) main text of Article 89(2) of the Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005), newly established pursuant to Article 89(2), where one household possesses a house (including land annexed to a house; hereafter the same shall apply in this Article) and an association member's relocation right acquired by approval of a management and disposal plan under the Do Government Act, and transfers the relevant house, the special case of non-taxation for one household under Article 12(1) of the Addenda of the Income Tax Act shall not apply to the special case of non-taxation for one house under Article 89(2). The amended provision under Article 12(1) of the Addenda of the Income Tax Act applies from the first time after January 1, 2006 to the portion for which the management and disposal plan of the house redevelopment project or the house reconstruction project under the Do Government Act has been approved, and where one household owns the house and transfers the house, it shall not be subject to the special case of non-taxation under the 201.

However, the Income Tax Act regulates special cases of non-taxation for one household in cases where one household possesses one house and one association member's relocation right for the purpose of real estate speculation through mediating the association member's relocation right as above, and exceptionally intends to exempt the transfer income tax for one house and one association member's relocation right for the purpose of actual use. In other words, the proviso of Article 89 (2) of the former Income Tax Act provides that "the same shall not apply to cases prescribed by the Presidential Decree for the purpose of residing in the period of implementing a housing reconstruction project or a housing redevelopment project under the Do Government Act or for other unavoidable reasons," and Article 156-2 (3) of the former Enforcement Decree of the Income Tax Act, one of the delegated provisions, provides that "where one household possessing one house and one association member's relocation right temporarily comes to possess one house and one association member's relocation right within two years from the date of acquisition of the association member's relocation right (including cases where it falls under the reasons prescribed by Ordinance of the Ministry of Strategy and Finance within two years)" shall be regarded as one house for 11.

When one household possesses one house and one association member's relocation right, in light of the above legislative intent of prescribing the special exception for non-taxation of one house for one household and the contents of Article 156-2 (3) through (5) of the former Enforcement Decree of the Income Tax Act, etc., "where one household possessing one house in the Republic of Korea prior to transferring such house" means cases where one household acquires one house and one association member's relocation right temporarily becomes to possess one house and one association member's relocation right temporarily by acquiring one association member's relocation right while one household possesses only one house, and it is reasonable to view that the special exception for non-taxation under Article 156-2 (3) of the former Enforcement Decree of the Income Tax Act does not fall under such cases where one household possesses two houses and convert one association member's relocation right into one association member's relocation right, regardless of the legislative intent of Article 156-2 (3) of the former Enforcement Decree of the Income Tax Act, and thus, it does not conform with the previous Enforcement Decree of the Income Tax Act within 2 years prior to the transfer of one house.

In this case, first of all, the plaintiff household owned the previous house and the association member's relocation right in this case and transferred the previous house in this case. Since the date of approval of the management and disposal plan under the Do Government Act after January 1, 2006, in principle, it cannot be subject to special cases of non-taxation for one household pursuant to the main sentence of Article 89 (2) of the former Income Tax Act and Article 12 (1) of the Addenda, the plaintiff's assertion and 2 of the former Enforcement Decree of the Income Tax Act are without merit. Furthermore, since the plaintiff's household acquired the right to move into one house and one association member's relocation right temporarily by acquiring the right to move into one house under the possession of only one house, according to the above legal principles, it cannot be applied to the special cases of non-taxation under the proviso of Article 89 (2) of the former Income Tax Act and Article 156-2 (3) of the former Enforcement Decree of the Income Tax Act, it cannot be accepted (the transfer of the previous house within 2 years from the date of acquisition of the house in this case).

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.