Whether the act of dividing and selling an orchard constitutes real estate sales business;

It is difficult to regard the Plaintiff’s transfer as real estate sales business in consideration of the fact that the Plaintiff’s transfer of land was not only a long-term holding of orchard but also a large size of land was inevitably divided because it is difficult to find the purchaser due to the lack of land category.

Article 16 (Tax Invoice)

Tax amount paid under Article 17 of the Value-Added Tax Act

1. The Defendant’s imposition of global income tax of KRW 133,098,210 on April 5, 2006 against the Plaintiff on April 5, 2006 and the imposition of global income tax of KRW 14,08,530 on global income for the year 2004 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On October 17, 1973, the Plaintiff purchased and owned ○○○○○ ○2-dong 1305-3 orchard 8,731 square meters (hereinafter “instant land”) and divided the instant land into 15 parcels around July 7, 2003, and transferred 13 parcels of the said divided land from August 2003 to January 2004 (hereinafter “instant transfer”), and reported and paid the transfer income tax to the Defendant.

B. However, on April 5, 2006, the Defendant imposed upon the Plaintiff global income tax of KRW 133,098,210, and global income tax of KRW 14,088,530 for the year 2004 (hereinafter “instant taxation disposition”) on the ground that the instant transfer act constitutes real estate sales business, and thus, income therefrom constituted business income rather than business income.

C. On May 25, 2006, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service, but the Commissioner of the National Tax Service dismissed the request on January 10, 2007.

[Ground of Recognition] Unsatisfy, Gap evidence 1 to 2, and Eul evidence 1 (including each number)

2. Summary of the parties’ assertion

A. The plaintiff

Although the Plaintiff continued to operate a wrusium for about 30 years since the acquisition of the instant land, since around 199, when the wrusal wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrus, the instant land was sold in one parcel, which is inevitable for the purchaser to appear as a lot due

B. Defendant

1) This title, where the Plaintiff developed and sold the land by dividing the instant land into 15 lots through a real estate broker and installing a road not superior to the purpose of orchard and a water supply and sewerage facility, etc., this title is included in the real estate sale business as part of the development activities of the land under the General Rule 19-7(1)3 and (4) of the Income Tax Act (see the relevant Acts and subordinate statutes, e.g., attached Table 1.). Therefore, the tax disposition of this case

3. Grounds for judgments; and

(a) Relevant statutes;

Attached Form 1.

(b) understanding of general rules 19-7(1)3 and (4) of the Income Tax Act;

As seen earlier, the Defendant cited the above general provisions as the main basis of the taxation disposition of this case (the determination of the Commissioner of the National Tax Service may be deemed to be the main basis of the above provision). In other words, the Plaintiff’s act constitutes “development activities of land” as stipulated by the above general provisions, and thereby, it should be evaluated as “operation of real estate sales business” as stipulated by the Income Tax Act. This evaluation seems to have been based on the premise that the above general provisions per se have independent normative power as an order of laws and regulations. However, the Defendant’s above understanding of the above general provisions is not based on (i) in terms of delegation system, but rather on delegation of Article 19 of the Income Tax Act and its Enforcement Decree; and (ii) in terms of the contents of the above general provisions, it is difficult to accept in that the development activities of the land of this case can not be seen as always establishing the relationship of “business of real estate sales,” and thus, it does not mean that the above general provisions have an independent authority to interpret or enforce the provisions of Article 19 of the Income Tax Act.

C. The instant decision: The meaning of Article 19 of the Income Tax Act and Article 34 of the Enforcement Decree of the Income Tax Act

Ultimately, the determination on the legitimacy of the instant taxation depends on whether it conforms to the above Act and the Enforcement Decree thereof. However, Article 19(1)12 of the Income Tax Act provides for the income accrued from real estate sales business, which is one of the business income subject to income tax, as prescribed by the Presidential Decree, and Article 34 of the Enforcement Decree of the same Act provides that real estate sales business refers to the building construction business and the real estate supply business under the Korean Standard Industrial Classification. However, the Korean Standard Industrial Classification provides that the real estate supply business refers to the "industrial activities that sell and sell the land of farm, housing site, etc. and the buildings, etc. constructed by giving a contract to others for the land of a farm, housing site, etc., which have been

Ultimately, the issue of whether the transaction of real estate constitutes real estate trading, which is a taxation requirement for business income, or is subject to transfer income tax, shall be determined according to the ordinary social norms, considering the acquisition and holding of real estate, whether the transfer is made, whether the transfer is made for profit, the scale and frequency of the transfer, the other party, etc., as well as the continuity and repetition of the degree that can be seen as a business activity. In making the judgment, not only about the relevant transferred real estate, but also about the entire real estate owned by the transferor, and all the circumstances surrounding the transfer during the period before and after the time when the transfer took place (see, e.g., Supreme Court Decisions 2004Du3700, Jun. 24, 2004; 2004Du5412, Apr. 24, 2001). In short, the issue of legitimacy of the taxation disposition in this case can be considered as the core business judgment in light of the above legal principles.

4. Determination

(a) Facts of recognition;

(1) Around October 17, 1973, the Plaintiff purchased the instant land and operated the instant land as a walsium directly or through a high ○○, Gangwon, etc. However, since around 1999, the walsium price salsium with a walsium decline and the walsium policy became difficult to operate the orchard, such as the implementation of walsium and the walsium policy, etc. Around 2001, the Plaintiff laid down the instant land as a walsium around that time.

(2) However, as the instant land was not sold for about one year, around June 2, 2003, the Plaintiff entered into a delegation agreement with the representative of ○○○ Licensed Real Estate Agents on the instant real estate disposition (hereinafter “instant delegation agreement”) and its main contents are as follows. Accordingly, the entire transfer of the instant land was carried out by Kim○○ upon being entrusted by Kim○○, and during which the advertisement was made to sell the instant land as the house site in daily information.

① The Plaintiff delegates his/her authority to sell the instant land to Kim○○ by dividing it into an adequate size, and Kim○ shall secure at least two billion won with the purchase price of the instant land, and where the purchase price is at least two billion won, the Plaintiff shall pay the excess amount to Kim○○ by up to 150 million won with the highest remuneration and other expenses. However, where the excess amount exceeds 150 million won, the Plaintiff shall be dealt with through consultation between the parties.

② All expenses incurred in the sale of the instant land and the expenses incurred in the division and access road packaging, waterworks and sewerage construction, etc. shall be borne by Kim○-○.

(3) Thereafter, around July 7, 2003, the Plaintiff divided the instant land into 15 lots as shown in the annexed Table 2, and sold 13 lots of land from August 2003 to January 2004 in total 1.85,444,00 won.

(4) Meanwhile, among the instant partitioned land, the Plaintiff donated the instant divided land to ○○○○ ○2 Dong 1305-18-18 766 square meters to ○○○○○○○. The said road extended and packaged access roads used as the existing farm road of the instant land. At the time of expanding and packing the said access roads, the Plaintiff installed a water supply and drainage facility with a size of 1305-11 462 square meters on the underground of the said road at the time of expanding and packing the access roads. At ○○○○2 Dong 1305-11 462 square meters, the Plaintiff was currently residing in ○○○○ 2 Dong 1305-11 462 square meters.

(5) The official land value prior to the division of the instant land (based on January 1, 2003) is KRW 187,000 per square meter. The Plaintiff’s wife located adjacent to the instant land was expropriated as a public site, and the amount of KRW 488,475,00 (per 292.500 per square meter) was paid as compensation around June 23, 2005, when the Plaintiff’s wife located adjacent to the instant land was expropriated as a public site.

[Ground of recognition] The statements and images of Gap evidence 3 through 19, Eul evidence 22, Eul evidence 2, Eul evidence 7 (including each number), and the purpose of the whole testimony and arguments of the witness ○○ and Go○○○

B. Determination as to whether the instant transfer constitutes a real estate sales business

(2) In light of the above legal principles, the Plaintiff had been holding approximately 30 years of land, and there was no other real estate transaction before and after the transfer of the instant land. ② The total purchase price of the instant land was KRW 1,854,40,00 (excluding KRW 273,00 per 0,00), which was difficult to find for the Plaintiff to purchase and sell the instant land by taking into account the following circumstances: (a) it was difficult to find out that there was a low-scale increase in the land price of the instant land for the purpose of the sale of the instant land by taking into account the fact that the Plaintiff’s construction of 00 square meters of land was carried out for the purpose of the sale of the instant land at 00 square meters of land; and (b) it was difficult to find that there was a low-scale increase in the land price of the instant land for the purpose of the sale of the instant land at 200,000 won, which was located in 02,500,000 won of the instant land.

Ultimately, the instant taxation disposition that the Plaintiff imposed on the Plaintiff on the ground that the Plaintiff’s income derived from the instant transfer constituted business income under the Income Tax Act cannot be deemed unlawful.

5. Conclusion

Therefore, the plaintiff's claim seeking the revocation of the taxation disposition of this case is reasonable and it is so decided as per Disposition by the assent of all participating Justices.