If the acquisition value is converted, necessary expenses should be applied even if the actual expense is paid, the estimated deduction amount.

Since the acquisition value of the instant real estate cannot be objectively confirmed, the conversion value is lawful, and so long as the acquisition value is based on the conversion value, necessary expenses are subject to the estimated deduction amount.

Article 97 (Calculation of Necessary Expenses in Transfer Income)

2018-Gu Partnership-30243 Revocation of imposition of capital gains tax

AA

O Head of tax office

November 22, 2018

December 20, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 134,643,880 for the Plaintiff on May 2, 2017 shall be revoked.

1. Details of the disposition;

A. On May 20, 196, the Plaintiff purchased the first floor No. 7 and second floor No. 7 (hereinafter “the first floor No. 1”) from HH on ○○○○○○ 304-5 and the second floor No. 2 (hereinafter “instant commercial building”). On July 20, 200, the Plaintiff purchased the first floor No. 6 (hereinafter “the second real estate of this case”) from Y from Y from Y on 2000. The first and second real estate of this case were collectively purchased from Y.

B. On September 29, 2011, the Plaintiff sold to ○○○○ in KRW 580,000,00 the first floor Nos. 6 and 7 of the instant real estate, and to ○○○ in KRW 130,00,00 among the instant real estate.

C. On November 30, 201, the Plaintiff reported and paid KRW 181,150 to the Defendant with the transfer value of each of the instant real estate as KRW 710,00,00,00, and necessary expenses as KRW 629,890,348 (acquisition value of KRW 529,935,758, capital expenditure amount of KRW 99,954,590).

D. Considering that it is impossible to verify the actual transaction price as at the time of acquisition of each of the instant real estate, the Defendant: (a) pursuant to the main sentence of Article 97(2)2 of the former Income Tax Act (amended by Act No. 12169, Jan. 1, 2014; hereinafter the same) the acquisition price of each of the instant real estate is KRW 315,706,395, which is the acquisition price calculated by converting the acquisition price of each of the instant real estate into the conversion price (hereinafter referred to as “converted price”); and (b) determined and notified the Plaintiff of KRW 319,878,219, which is the sum of the amount prescribed by Presidential Decree (hereinafter referred to as “ separately deducted amount”), KRW 4,171,824, which is KRW 319,878,219, May 2, 2017, the Defendant recognized the Plaintiff as necessary expenses and notified the Plaintiff of KRW 134,643,

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on July 18, 2017, but the said appeal was dismissed on January 18, 2018.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 18, Eul evidence Nos. 1 and 2 (including those with serial numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

① At the time of acquisition of each of the instant real estate, the Defendant calculated capital gains by using the converted value as the acquisition value on the ground that the actual transaction price cannot be confirmed even if the actual transaction price is confirmed. ② In the event that the actual transaction price is confirmed, the capital expenditure may be deducted from the necessary expenses, but the cost of construction of the building may not be deducted from the necessary expenses.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the actual transaction price can be acknowledged at the time of acquiring each of the instant real estate

In calculating gains on transfer, the actual transaction price, which is the basis for the calculation of gains on transfer, refers to the actual amount agreed for the payment itself or at the time of transaction, rather than the general market price that reflects the objective exchange value (see, e.g., Supreme Court Decision 2011Du24286, Oct. 15, 2015).

Meanwhile, as the tax authority bears the burden of proving the legality of taxation, the tax authority bears the burden of proof as a matter of principle, as necessary expenses that serve as the basis for determining taxable income. However, deduction of necessary expenses is more favorable to the taxpayer, and most of the facts that serve as the basis for necessary expenses are located in the controlled area of the taxpayer. As such, there is a case where it is difficult for the tax authority to prove it, so it is reasonable to have the taxpayer prove it by taking into account the difficulty in

C. (Supreme Court Decision 91Nu10909 Decided July 28, 1992; Supreme Court Decision 2002Du1588 Decided September 23, 2004, etc.)

First, the Plaintiff asserted that H. 1 purchased the instant real estate from H. 35 million won from H. 1.35 billion won. However, the following circumstances acknowledged by the evidence Nos. 3, 6, 7, 8, and 16, ① the agreement of March 27, 1996 submitted by the Plaintiff (Evidence No. 3) is written in the form of an intermediate payment on the 9-6-day basis, and the remaining amount is fixed on the 9-day date, and the remaining amount of the intermediate payment and the remaining amount is not fixed on the 9-day basis, and it is difficult to view that the remaining amount of the intermediate payment and the remaining amount are not fixed on the 9-day sales contract, and that the remaining amount is not fixed on the 90-day sales contract, and that the remaining amount is not fixed on the 9-day sales contract, which is not fixed on the 90-day sales contract, and that H. 196-day sales contract was written on the 909-day sales contract.

Next, with respect to the instant 2 real estate, the Plaintiff purchased from YY the instant 2 real estate and No. 6 (hereinafter referred to as “No. 6 of the second floor”) total of KRW 350 million from YY, and asserts that the actual acquisition value of the instant 2 real estate is KRW 181,595,758 (the amount divided by the standard market price as the amount of KRW 350,000,000). However, the following circumstances, which are acknowledged by comprehensively taking account of the written evidence No. 13, 16, 18, and 21, the entire purport of the pleadings in the witness JJ testimony, and the following circumstances, ① there is no sales contract made between the Plaintiff and YY with respect to the instant 2 real estate, ②

YY Under the YY’s certificate of real estate transactions (YY evidence No. 13), YY sold the real estate No. 2 and No. 6 of this case to the Plaintiff and KK for KRW 350 million, and the down payment of KRW 50 million was received on June 20, 200, and the remainder of KRW 300 million was paid on July 18, 200. However, there is no objective financial data regarding the payment of the down payment, and YYJ’s YJ made a statement that the Plaintiff would take over the collateral security debt of KRW 100,000,000,000,000 for KRW 70,000,000,0000,000,000,000,000,000,000,000,000,000 won.

Therefore, since each real estate of this case constitutes a case where it is impossible to confirm the actual transaction price at the time of acquisition, there is no error in the disposition of this case, which is calculated on the basis of the conversion price. The plaintiff's assertion on this part is without

2) Determination on the assertion of necessary expense deduction

Article 97 (1) of the former Income Tax Act provides that "acquisition value" in subparagraph 1 of the necessary expenses deductible from the transfer value when calculating gains from transfer using the actual transaction value as the transfer value of assets, "capital expenditure, etc. prescribed by the Presidential Decree" in subparagraph 2, "transfer expenditure, etc. prescribed by the Presidential Decree (hereinafter "transfer expenditure")," in subparagraph 3, "transfer expenses, etc. prescribed by the Presidential Decree" (hereinafter "transfer expenses") shall be included in the calculation of necessary expenses if the acquisition value is calculated based on the actual transaction value under subparagraph 1, and Article 97 (2) provides that the acquisition value shall be calculated by adding the amount in subparagraphs 2 and 3 of paragraph (1) to the amount in subparagraph 2, while the acquisition value shall be calculated by adding the estimated deduction amount prescribed by the Presidential Decree to the necessary expenses if the sum of the estimated transfer expenses and the deduction amount is smaller than the total capital expenditure and the transfer expenses.

In the event that the acquisition value cannot be confirmed at the time of the acquisition of assets, and the acquisition value is estimated by transaction example, etc., the acquisition value is to be calculated by the transaction example, etc., and considering that the capital expenditure or transfer expense, etc. is deducted from the necessary expense without confirming whether or not the taxpayer actually paid the expenses, it is reasonable to allow the taxpayer to deduct the estimated amount from the necessary expense expense without asking whether or not the capital expenditure or transfer expense is actually disbursed. In such a case, even if the taxpayer actually paid the capital expenditure or transfer expense, etc., in principle, even if the taxpayer actually paid the expenses, it cannot be deducted from the estimated amount to the necessary expense (see, e.g., Supreme Court Decision 2011Du24286, Oct. 1

In this case, since each real estate of this case constitutes a case where it is impossible to verify the actual transaction price at the time of acquisition as seen earlier, necessary expenses are the sum of estimated deduction amounts in accordance with Article 97 (2) 2 of the former Income Tax Act, but only if capital expenses and transfer expenses are more than the sum of estimated deduction amounts in the estimated deduction amount in accordance with the capital expenses and transfer expenses, they may be deducted as necessary expenses. Even according to the plaintiff's assertion, since the capital expenses of this case are less than the sum of estimated deduction amounts in the estimated deduction amount converted into 9,954,590 won, the plaintiff's assertion that actual capital expenses should be deducted is without merit.

3. Conclusion

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