Whether it constitutes real estate trading business

The case holding that the original disposition of this case was recognized for real estate sales business with continuity and repetition as business activities when the plaintiff runs the real estate brokerage business and considering the transfer of other sales rights, etc. on two occasions.

Article 19 of the Income Tax Act (Business Income)

Article 1 of the Enforcement Rule of the Value-Added Tax Act (Scope of Business)

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the Plaintiff

The Defendant’s disposition of imposition of global income tax of KRW 991,602,360 against the Plaintiff on October 06, 2005 is revoked.

1. Details of the disposition;

A. On December 18, 2001, the Plaintiff acquired 1 and 101 of the ○○○○-dong ○○○○○○○○-dong ○○○○○○○○○-dong ○○○○○○○-dong 201 (hereinafter “instant real property”) from KRW 2.23 billion, and entered into a sales contract to sell the said real property at KRW 5 billion with ○○○ Bank on February 5, 2002, and completed the registration of ownership transfer on January 22, 2003 (hereinafter “instant transaction”).

B. On June 1, 200, the Plaintiff operated a real estate brokerage business by taking office as the representative director of ○○○ Real Estate Co., Ltd. with real estate consulting, etc. for business purposes. On November 6, 2001, prior to the acquisition of the instant real estate, the Plaintiff registered as a rental business operator with the location of the pertinent real estate on November 6, 2001, and acquired the said real estate and reported and paid the value-added tax on the real estate leasing business. On June 9, 2003, the Plaintiff reported and paid the value-added tax on the real estate leasing business after registering as a rental business operator on the two real estate in the column of [Do] set forth below the location of business

C. On April 6, 2005, the Defendant: (a) on December 12, 2001, to August 5, 2003, as indicated below, acquired real estate equivalent to KRW 9.698 billion on a total of five occasions; (b) disposed of three of them, and obtained profit margins of KRW 3.270 million on a total of KRW 5.7 billion; and (c) on the ground that the gains from transfer of the instant real estate are income generated from real estate sales, the Defendant determined and notified that the Plaintiff imposed a global income tax of KRW 1,133,187,040 on the ground that the gains from transfer of the instant real estate accrued from real estate sales (the Defendant shall be reduced to KRW 1,133,187,040 on the first disposition of the National Tax Tribunal on December 16, 2005; and (d) reduced the remaining portion to KRW 3.270,7184,96,966.

(A) Evidence Nos. 1-7, Nos. 1 and 2, fact-finding with the president of ○○○, and the purport of the whole pleadings)

(unit: million won)

No.

J. J. J. land

Land Category

date of acquisition;

Do Do Do Do

acquisition price

Transfer Price

1

○○○ Dong ○○ ○○ ○○ character

Loan 101

Office

December 18, 2001

January 22, 2003

2,230

5,050

2

○○○ ○○○ ○○ ○○○el

201

〃 4

August 29, 2003

5,696

holding

3

○○○○○○○○○○○

○ ○○○○

Sales Rights

July 23, 2002

May 20, 2003

159

509

4

○○○○○○○○○○○

○ ○○○○

〃 4

April 1, 2002

June 28, 2002

161

261

5

○○○○○○○○○○○

○ ○○○○

Apartment house

June 30, 2003

1,452

holding

2. The legality of disposition.

A. The plaintiff's assertion

The real estate in this case is not acquired for the purpose of real estate sales, but for the purpose of real estate sales, and each right to sell real estate in the order of the above [Do] 3 and 4 is a right to real estate, not a real estate itself, and the real estate in the order of the above [Do] 2 is acquired to continue real estate rental business, and the real estate in the order of the above [Do attached] 5 is acquired to be used as a residence.

Ultimately, the Plaintiff acquired the instant real estate in the second quarter of 2001, acquired the instant real estate in the first quarter of 2003, acquired the instant real estate in the first quarter of 2003, acquired the real estate No. 5, and acquired the real estate in the second quarter of 2003, and only acquired the real estate No. 2 in the second quarter of 2003.

Therefore, the above series of transactions by the Plaintiff do not constitute "acquisition and sale of real estate at least once during one taxable period" as stipulated in Article 1 (2) of the Enforcement Rule of the Value-Added Tax Act, and even if not, the transfer of real estate in this case was sold for the purpose of lease rather than for the purpose of profit margin, but for the special reason that it cannot continue to be held for the purpose of lease, and there is no continuity and repetition of the transaction in this case. Thus, the transaction in this case cannot be deemed to constitute real estate sales in light of the transaction circumstances, size, frequency, and mode.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

The issue of whether a real estate transaction constitutes a real estate trading should be determined in light of social norms, considering whether the transaction is continuous and repeated to the extent that it can be seen as a business activity in light of the scale, frequency, and mode of the transaction, and whether it is for profit-making. Article 1(1) of the Enforcement Rule of the Value-Added Tax Act is merely an exceptional provision that can be seen as a real estate trading, and so long as the real estate transaction has continued and repeated under the purpose of profit-making as a whole, the business feasibility of the transaction during the pertinent taxable period does not be denied even if the transaction occurred, even if it has been conducted in whole with continuous and repeated nature under the purpose of profit-making (see, e.g., Supreme Court Decision

Although there is a question as to whether the right to sell apartment units constitutes real estate subject to real estate sales business, considering the following various circumstances, considering that the transaction pattern of the Plaintiff, such as selling real estate again within a short time while running the real estate brokerage business, acquiring real estate by lending another person's name, or resale of the right to sell real estate in a short period, is different from the transaction with which the general public takes place in a contingent and repeated manner, the Plaintiff's series of transactions in this case appears to be part of business activities as a whole, since all transactions in this case were conducted continuously and repeatedly for profit purposes. The Plaintiff's act of acquiring and selling the real estate in this case also constitutes a series of business activities with continuity and repetition, and thus, it constitutes a real estate sales business for profit-making purposes. Thus, the Defendant's disposition in

(1) On December 18, 2001, the Plaintiff acquired the instant real estate on December 18, 200 and then sold the said real estate again on February 5, 2002, not later than two months.

(2) From February 2, 2001 to August 2003, two sales rights (3,4 above) have been acquired and sold in addition to the instant real estate, and two real estate (2,5 above) have been acquired and held.

(3) The Plaintiff acquired a large number of real estate while running the real estate brokerage business, and acquired a large amount of profits from resale by again trading them within the short period.

(4) under another person’s name the transaction of real estate Nos. 4 and 5 in the order of

3. Conclusion

Therefore, the plaintiff's claim is dismissed as ordered.

public official law, order of law,

Income Tax Act

Article 19 (Business Income)

(1) Business income shall be the following incomes generated during the relevant year:

1. to 11. omitted;

12. Incomes accruing from real estate sales business determined by the Presidential Decree;

13. Omission; and

Enforcement Decree of the Income Tax

For the purpose of Article 19 (1) 12 of the Act, the term “real estate sales business as determined by the Presidential Decree” means buildings, construction businesses (limited to the case of self-permanent construction and sale of buildings), and real estate supply businesses on the Korean Standard Industrial Classification: Provided, That the housing construction and sales business as prescribed in Article 32 shall be excluded.

Enforcement Rule of the Value-Added Tax Act

Article 1 (Act of Business)

(1) omitted.

(2) "Business prescribed by Ordinance of the Ministry of Finance and Economy" in Article 2 (2) of the Decree means a business selling or selling real estate (including cases of selling or selling real estate by self-construction or other buildings for residence or non-residential use) or a brokerage thereof, indicating its business purpose, or selling real estate at least once during one taxable period for business purpose, acquiring real estate at least twice during one taxable period for business purpose.

(3) omitted.