Cho High Court Decision 2008 Jeon 3325 (O. 18, 2010)

Where the transfer of land has business feasibility, it shall be taxed as business income.

In determining whether the transfer of real estate is the business income, it shall be taken into account not only for the relevant transferred real estate but also through the front and rear of the time when the relevant transfer was performed throughout the entire real estate possessed by the transferor, and it shall not be viewed differently from the type of transfer under the Land Expropriation Act.

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

○ ○

The Director of the National Tax Service

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

The Defendant’s disposition of imposition of global income tax of KRW 106,870,640 for the Plaintiff on June 2, 2008, global income tax of KRW 250,703,30 for the year 2004, and global income tax of KRW 22,122,80 for the year 2006 is revoked.

1. Details of the disposition;

A. From January 2008 to March 2008, the director of the Daejeon Regional Tax Office investigated the Plaintiff as a high-income earner, and then notified the Defendant of each taxable period of taxation by deeming that the Plaintiff’s act of transfer of real estate listed in the Plaintiff’s real estate column in [Attachment 2] from January 2002 to March 2006, 202, ○○ City, ○○ City, indicated in the Plaintiff’s real estate transfer record table (hereinafter “real estate transfer record table”) in the Plaintiff’s real estate transfer record table (hereinafter “real estate transfer record table”) after 2002, ○○ City, ○○-si, △△△△○, 5-19, and 34 lots (hereinafter “instant land”) under Article 19(1)12 of the former Income Tax Act, Article 34 of the former Enforcement Decree of the same Act (amended by Presidential Decree No. 22034, Feb. 18, 2010) constitutes real estate sales business.

B. Accordingly, on June 2, 2008, the Defendant: (a) omitted the Plaintiff’s global income tax of KRW 85,079,08 in 202; (b) KRW 230,545,00 in 203; and (c) KRW 561,51,350 in 204; and (b) KRW 88,356,60 in 206; and (c) imposed global income tax of KRW 26,148,530 in 202; and (d) global income tax of KRW 106,870,640 in 203; and (e) global income tax of KRW 250,703,300 in 204 in 206; and (e) global income tax of KRW 282,80 in 206 in 206; and (e) imposed global income tax of KRW 405,305,535.

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on September 2, 2008. On March 18, 2010, the above appeal was dismissed. However, on July 21, 2010, the Defendant revoked ex officio the disposition ex officio on the ground that the exclusion period for imposition of global income tax of 26,148,530 won for the year 2002 was expired (hereinafter “instant disposition”).

[Reasons for Recognition] In the absence of dispute, Gap evidence Nos. 1 2, Eul evidence Nos. 1 through 4, Eul evidence Nos. 13 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff is a farmer residing in ○○○ City and living in the farmhouse. The Plaintiff acquired and transferred the instant land to cultivate, and had already reported and paid transfer income tax or been subject to non-taxation provisions on transfer income tax on farmland substitute land. Some land was expropriated by the State for public projects regardless of whether the Plaintiff himself/herself wishes. In light of such circumstances, the instant land cannot be deemed to have been transferred for real estate sales business purposes, notwithstanding that the Defendant did not regard the Plaintiff as a real estate sales businessman, and accordingly, the instant disposition imposing the comprehensive income tax on the transfer of the instant land was unlawful.

B. Relevant statutes

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) The Plaintiff, as a shareholder of △ Construction Co., Ltd. conducting the afforestation, repair, etc. of aggregate production sales business, continued to work as a director of the said company from February 28, 2000 to the present date. On the other hand, the Plaintiff registered the business as “△△△△ Industry” in around 2003. Meanwhile, the Plaintiff’s domicile is ○○○○○-ri 94-3 at ○○○○○-si.

(2) As between 1985 and 2007, the Plaintiff acquired a total of 43 real estate through sale or auction as stated in the Plaintiff’s “the details of the acquisition and transfer of real estate” (hereinafter “the details of the acquisition and transfer of real estate”) since 1985, and transferred a total of 62 real estate between 1989 and 2006 on the grounds of sale or expropriation of real estate. The land that the Plaintiff acquired and transferred as mentioned above is seen in the “location of the acquisition and transfer of real estate” column, as well as ○○○○○○○○ in the Plaintiff’s domicile, as seen in the “location of the acquisition and transfer of real estate” column.

(3) As to the land so acquired, the Plaintiff divided a large scale of land into several lots over several occasions, such as “the history of changing real estate” as stated in [Attachment 3], and transferred the land category of land into “the factory site, site, warehouse site, road, etc.” in the “electric field, paddy field, cemetery site,” etc., and transferred it to another party through the annexation of adjacent land, etc. or the correction of boundary. In relation to this, the Plaintiff requested 28 cases of application for boundary restoration in the Korea Cadastral Corporation between 200 and 2006, 2 cases of drawing, 82 cases of partition surveying, and 16 cases of cadastral survey.

(4) 또한 원고는 준농림지역에 있던 원고 소유의 ○○시 ○○면 ■■리 산 22-15 임야 29,056㎡에 대하여는, 원고의 동생으로서 가정주부인 최AA가 대표자로 등기된 ◇◇산업 명의로 하여금 자동차 차체용품공장설립 승인을 받도록 하게 한 뒤 사업자등록은 하지도 아니한 채 위 토지의 평탄작업을 마치고, 2003. 12. 11. 공장신설변경승인, 2004. 1. 29. 토지거래허가를 받아 2004. 2. 12. 주식회사 ●●씨에게 위 토지를 양도하였다.

In addition, the Plaintiff, if ○○○○ City, owned by the Plaintiff in an agricultural and forest area, obtained approval for the establishment of a metal assembly structure under the name of the △ industry registered as the representative of the Plaintiff, and transferred it to HuCC on March 17, 2003, after having reported the closure of the business of the said company on February 2, 2004, upon obtaining land transaction permission.

(5) The sum of the actual transfer value of the instant land transferred by the Plaintiff between 2002 and 2006 was 3.1155 million won (2.77 billion won from 2003 to 2006, a taxable period of this case), and the amount of the Plaintiff’s earned income during the same period was 180 million won.

(6) The Plaintiff also holds 12 lots of land (the total sum of 4,987 square meters and the total sum of 51,4360,000 won) in ○○ City and △△△ City, such as the current status of real estate possession by the Plaintiff, other than the instant land already transferred as above.

[Ground of recognition] Facts without dispute Gap's evidence Nos. 1 to 5 Eul's evidence Nos. 12 (each of the evidence Nos. 5 and 12) and the purport of the whole pleadings

D. Determination

(1) Whether the income from the transfer of real estate constitutes business income or transfer income under the Income Tax Act shall be determined according to social norms, taking into account whether the transferor’s acquisition and holding of real estate, creation, size and frequency of transfer, mode, other party, etc. are aimed at earning profits, and whether the mode of transfer is no different from that of the transferor’s acquisition under the Land Expropriation Act. In making such a determination, it shall be taken into account not only the transfer of real estate, but also all the circumstances before and after the transfer of the transferor’s real estate throughout the entire real estate owned by the transferor, as well as the transfer of real estate throughout the time when the transfer took place. In addition, income from the transfer of real estate by a resident falls under one of the business income subject to global income tax or transfer income subject to global income tax under the Income Tax Act depending on whether the transfer was made as a part of the business, and thus, if the transfer income tax and global income tax are imposed on the income from the transfer of real estate, it shall be determined to be unlawful by either the imposition of transfer income tax or the imposition of transfer income tax shall be determined as unlawful.

(2) In light of the above facts acknowledged in this case, ① the Plaintiff acquired 43 land by sale or auction from 1985 to 2006, and transferred 62 land due to sale or expropriation. During that process, the Plaintiff acquired 10 years to 20 years to 20 years to 20 years to 3 years to 3 years to 5 years to 20 years to 3 years to 5 years to 20 years to 3 years to 3 years to 5 years to 5 years to 6 years to 20 years to 3 years to 5 years to 20 years to 5 years to 6 years to 3 years to 5 years to 20 years to 20 years to 3 years to 5 years to 6 years to 5 years to 20 years to 17 years to 3 years to 6 years to 5 years to 3 years to 5 years to 20 years to 5 years to 2 years to 20 years to 3 years to 5 years to 20 years to 2.

(3) Therefore, the instant disposition is lawful where the Defendant deemed the Plaintiff as a real estate sales businessman and imposed a comprehensive income tax on the transfer of the remaining land except for the portion transferred in 2002 among the instant land.

3. Conclusion

Therefore, the plaintiff's claim of this case is without merit, and it is so decided as per Disposition by the court below.