Paragraph (1) of the actual transaction price at the time of acquisition to apply to the real estate acquired through inheritance or donation.

Where capital gains tax is calculated as the actual transaction value, the actual transaction value to be applied to the real estate inherited or donated shall be based on the appraised value under the Inheritance Tax and Gift Tax Act at the time of inheritance or donation (Article 163 (9) of the Enforcement Decree of the Income Tax Act shall apply by delegation under Article 97 (5)

Article 97 (1) of the Income Tax Act as necessary expenses for transfer income, Article 163 (9) of the Enforcement Decree of the Income Tax Act

The plaintiff's claim is dismissed.

Litigation costs shall be borne by the plaintiff.

The Defendant’s disposition of imposition of capital gains tax of KRW 91,650,240 for the Plaintiff on June 12, 2006 shall be revoked.

1. Details of the disposition;

A. On May 1, 1998, the Plaintiff acquired ○○○○○○○○ ○○○○ 504-1 1,101 m2 (hereinafter “instant real estate”) by inheritance, and transferred 65 million won to the Plaintiff, etc. on August 25, 2005.

B. On October 2005, the Plaintiff filed a preliminary return on the tax base of transfer income for the year 2005 with the Defendant. On August 25, 2004, the Plaintiff calculated the transfer income tax by calculating the transfer margin of Article 176-2 (2) 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same) on August 25, 2004, on the ground that the daily price of the instant real estate was designated as a one-person speculation area under Article 96 (1) 6-2 of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same shall apply) and paid the transfer margin of the instant real estate as the actual transaction price, on the ground that the actual transaction price is not verified.

C. However, the Defendant: (a) since the instant real estate was acquired by inheritance, its acquisition value should be calculated as KRW 79,272,000, which is the value assessed according to the standard market price at the time the inheritance commences pursuant to Article 163(9) of the former Enforcement Decree of the Income Tax Act at the time of commencing the inheritance; and (b) on June 12, 2006, issued the instant disposition to increase or impose capital gains tax amounting to KRW 91,650,240 for the Plaintiff in 2005.

[Ground of recognition] Facts without dispute, Gap 1 through 7, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

According to Article 100 of the Income Tax Act, when the transfer value is based on the actual transaction value, the acquisition value shall also be based on the actual transaction value. In this case, where the actual transaction value at the time of acquisition cannot be confirmed, the conversion value under Article 97(1)1 (c) and Article 114(5) of the former Enforcement Decree of the Income Tax Act should be calculated based on the conversion value under Article 176-2(2)2 of the former Enforcement Decree of the Income Tax Act. However, although the transfer value of the real estate at the time of acquisition is the actual transaction value, the defendant, while the transfer value of the real estate at the time

(b) Related statutes;

○ former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

○ Article 96 of the former Income Tax Act (Transfer Price)

(1) The transfer value of assets referred to in Article 94 (1) 1 and 2 shall be the standard market value at the time of transfer of the assets concerned: Provided, That where the assets concerned fall under any of the following subparagraphs, the actual transaction value between the transferor and transferee (hereinafter referred to as “actual transaction value”) shall apply:

6-2. Where the rate of increase of real estate prices in the relevant area is higher than the national consumer price inflation rate, and is prescribed by the Presidential Decree, among real estate located in the area designated by the Minister of Finance and Economy according to the standards and methods prescribed by the Presidential Decree, because the increase of real estate prices in the

○ Article 97 of the former Income Tax Act (Calculation of Necessary Expenses in Transfer Income)

(1) In calculating gains on transfer of a resident, necessary expenses to be deducted from the transfer value shall be as follows:

1. Acquisition value:

(a) In case of assets as prescribed in Article 94 (1) 1 and 2, the standard market price at the time the assets are acquired: Provided, That in case where the assets concerned fall under any of subparagraphs of Article 96 (1), it shall be based on the actual transaction price required for the acquisition of such assets;

(c) In the case of proviso (a) or (b), where it is impossible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value

(5) Matters necessary for calculation of necessary expenses, such as the scope of actual transaction price required for acquisition and gift tax amount shall be prescribed by Presidential Decree.

○ Article 100 of the former Income Tax Act (Calculation of Gains on Transfer)

(1) In the calculation of gains on transfer, the transfer value shall be based on the actual transaction value (including the value provided for in Article 96 (3) and the amount of transaction example value, appraisal value, etc. provided for in Article 114 (5) in cases where the amount of transaction example value or appraisal value is applied) in the calculation of gains on transfer, and the acquisition value shall be based on the actual transaction value (including the amount provided for in Article 97 (7) and the amount of transaction example value, appraisal value, conversion value, etc. provided for in Article 114 (5) in cases where the amount of transaction example value, appraisal value

○ Article 114 of the former Income Tax Act (Determination, Revision, and Notice of Tax Base and Amount of Tax for Capital Gains)

(2) If any omission or error is found in the details reported by a person who has made a preliminary return under Article 105 or a person who has made a final return under Article 110, the chief of the regional tax office having jurisdiction over the place of tax payment shall

(4) If the chief of the district tax office or the director of the regional tax office having jurisdiction over the place of tax payment determines or revises the tax base of transfer income and the amount of tax under paragraphs (1) through (3), he shall determine or correct the tax base of transfer income and the amount of tax under Articles 96 and 97: Provided, That in case where the resident makes the preliminary return or the final return on the tax base of transfer income under Articles 96 (1) 6 and 97 (1) 1 (a) (proviso), and if the reported value is different from the fact, and if the

(5) In applying the provisions of paragraph (4), in case where the transfer value or acquisition value is based on the actual transaction value, and where it is impossible to recognize or confirm the actual transaction value at the time of transfer or acquisition of the relevant assets by the books or other documentary evidence on the grounds as determined by the Presidential Decree, the transfer value or acquisition value may be determined or corrected by the estimated survey based on the transaction example value, appraisal value, conversion value (referring to the acquisition value converted by the actual transaction value, sale case value or appraisal value by the

○ Article 163 (Necessary Expenses for Transferred Assets) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005)

(9) In applying Article 97 (1) 1 (a) (proviso) and (b) of the Act to the assets received by inheritance or donation (excluding the donations under Articles 33 through 42 of the Inheritance Tax and Gift Tax Act), the values appraised under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or of donation shall be considered as the actual transaction values at the time of acquisition.

(12) The term “amount of transaction example, appraisal value or conversion value as prescribed by the Presidential Decree” in Article 97 (1) 1 (c) of the Act means the amount as provided in the provisions of Article 176-2 (2) through (4).

○ Article 176-2 (Estimated Decision and Revision) of the former Enforcement Decree of the Income Tax Act

(2) The term “acquisition price converted by the method prescribed by the Presidential Decree” in Article 114 (5) of the Act means the acquisition price converted by the method in the following subparagraphs:

2. In the case of the rights entitled to acquire the land, buildings and real estate under Article 96 (1) 1 through 7 of the Act (the provisions of subparagraph 6 shall apply only to the assets acquired before a fictitious acquisition date under paragraph (4)), the amount calculated by the following formula:

(3) Where the transfer value or acquisition value is estimated, determined or revised pursuant to Article 114 (5) of the Act, it shall be the value calculated by applying the method falling under each of the following subparagraphs in sequential order: Provided, That where the transaction example referred to in subparagraph 1 or the appraisal value referred to in subparagraph 2 is deemed to be objectively unreasonable, such as the value, etc. based on the transaction with the related party provided for in Article

3. Acquisition price converted under paragraph (2); and

○ Article 60 of the Inheritance Tax and Gift Tax Act (Principles of Appraisal, etc.)

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be determined according to the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as "date of appraisal").

(2) The market price under paragraph (1) shall be the price which is considered to be normal in the case of free trade between many and unspecified persons, and shall include the price of expropriation, public auction, appraisal price, etc. which is recognized as the market price under conditions

(3) In applying paragraph (1), where it is difficult to compute the market price, the price assessed by the methods prescribed in Articles 61 through 65 shall be based on the types, scale, transaction conditions, etc. of the relevant property.

Article 61 of the Inheritance Tax and Gift Tax Act (Appraisal of Real Estate, etc.)

(1) Real estate shall be appraised by the following methods:

1. Land:

The officially assessed individual land price under the Public Notice of Values and Appraisal of Real Estate Act (hereinafter referred to as the "officially assessed individual land price"): Provided, That the value of the land for which no officially assessed individual land price exists shall be the amount appraised by the method as determined by the Presidential Decree in consideration of the officially assessed individual land price of neighboring similar land, and with respect to the land in the area prescribed by the Presidential Decree

Article 49 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (Principles of Appraisal, etc.)

(1) For the purpose of Article 60 (2) of the Act, the term "those recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the expropriation or public sale price, the appraised price, etc." means the amount confirmed by the provisions of any of the following subparagraphs in case of sale, appraisal, expropriation, auction (referring to an auction under the Civil Execution Act; hereafter the same shall apply in this paragraph) or public auction (hereafter referred to as "sale, etc." in this paragraph) during a period of not more than six months before and after the standard date of appraisal (in the case of donated property, three months; hereafter referred to as the "evaluation

C. Determination

Article 94 (1), Article 96 (1), the proviso of Article 97 (1) 1 (a) and (c) of the former Income Tax Act provides that the transfer value and the acquisition value shall be calculated on the basis of the actual transaction value in the event that the transfer value falls under the real estate located in the speculative area. In this case, if it is impossible to verify the actual transaction value at the time of acquisition, the transfer value and the amount calculated by applying the transaction example value, appraisal value or conversion value prescribed by the Presidential Decree may be deemed the acquisition value. On the other hand, Article 163 (9) of the former Enforcement Decree of the Income Tax Act provides that "in applying the proviso of Article 97 (1) 1 (a) of the Act to the assets inherited or donated, the value appraised pursuant to Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or donation shall be deemed the actual transaction value at the time of acquisition (Article 163 (9) of the former Enforcement Decree shall be deemed the special provisions under Article 97 (1) of the Income Tax Act.6)

Therefore, the acquisition value of the instant real estate shall be calculated according to the provisions of Article 97(5) of the former Income Tax Act and Articles 60 through 66 of the former Enforcement Decree of the Income Tax Act pursuant to Article 163(9) of the former Enforcement Decree of the Income Tax Act. Article 60 of the Inheritance Tax and Gift Tax Act provides that the value of the instant real estate shall be calculated according to the market price as of the date of commencing the inheritance in principle (paragraphs 1 and 2), in cases where it is difficult to calculate the market price as of the date of commencing the inheritance (Paragraph 3), the value of the instant real estate shall be calculated according to the methods prescribed in Articles 61 through 65 (Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act ( May 1, 198), and thus, it is lawful for the Defendant to dispose of the instant real estate by taking the acquisition value of the instant real estate as of the date of commencing the inheritance under Articles 60(3) and 61(1)1 of the Inheritance Tax Act.

3. Conclusion

Thus, the plaintiff's claim seeking the cancellation of the disposition of this case cannot be accepted, and it is dismissed.