At the time of reporting the transfer income tax of this case, it is apparent that the plaintiff has made excessive report.

The actual transaction value of the land of this case can be acknowledged as alleged by the plaintiff, but it shall be the acquisition value of the land of this case, and if the transfer income tax to be paid by the plaintiff is re-calculated by reflecting the acquisition value of the building of this case, it is more than the disposition of this case that the defendant corrected and notified to the plaintiff, and thus, the

Article 97 (Calculation of Necessary Expenses for Transfer Income)

2017Guhap24289 Revocation of Disposition of Imposing capital gains tax

AA

○ Head of tax office

November 2, 2018

December 7, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On April 7, 2017, the Defendant revoked the disposition of imposition of global income tax ○○ and ○○○○○○○ on the Plaintiff for the year 2016.

1. Details of the disposition;

A. On December 16, 2002, the Plaintiff acquired the instant land from BB to ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ (hereinafter “instant land”). On November 28, 2003, the Plaintiff newly constructed an officetel of 10 stories above the above ground, and completed registration of initial ownership by constructing an officetel of 10 stories above the above land (hereinafter “instant building”); on July 14, 2016, the Plaintiff transferred the instant real estate to ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○

○○○○○○○○○ was reported and paid.

B. From February 20, 2017 to March 11, 2017, the Defendant conducted an investigation of capital gains tax on the Plaintiff, and calculated the acquisition value of the instant real estate as ○○○○○○○○○○○○○○○○○ (in case of land, ○○○○○○○○○○○○○, which is the value confirmed by a tax invoice, etc., the conversion acquisition value based on the standard market price, and in case of a building, ○○○○○○○○○○○○, which is the value confirmed by a tax invoice, etc.), and notified the Plaintiff of the correction and notification of the capital gains tax on April 7, 2017

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on May 30, 2017, and the Tax Tribunal dismissed the Plaintiff’s claim on September 7, 2017.

[Recognition] Facts without dispute, Gap evidence 1 to Gap evidence 4 (each number is included) and the purport of the whole pleadings

2. The plaintiff's assertion and judgment

A. The plaintiff's assertion

The disposition of this case shall be revoked because there are the following defects.

1) On March 6, 2016, the notice sheet notified by the Defendant to the Plaintiff on March 6, 2016 is merely a notice of the tax base and calculation details of the instant real estate, but does not contain specific details, such as tax rates, which serve as the basis for calculation. It is unlawful because the details of penalty calculation are not

2) The Defendant imposed the instant disposition without deducting ○○○○○○ upon the Plaintiff’s preliminary return of capital gains tax, and thus, the instant disposition constitutes double taxation.

3) Since the Plaintiff purchased the instant land at ○○○○○○○○○, and disbursed each of the registration expenses, including the cost of boundary surveying, ○○○○○○○○○○○○○○○○○○○○○, acquisition tax, ○○○○○○○○○○○○, brokerage commission, and the purchase amount of national housing bonds, the acquisition value of the instant land was unlawful in calculating the acquisition value of the instant land at ○○○○○○○○○○○○○○○, which is the conversion value based on the standard market price when the Defendant rendered the instant disposition.

4) The instant building was commenced and completed around 2005 by the Plaintiff’s joint management with CCC in 2002, and the amount on the construction cost specification reported by the Plaintiff to the competent tax office immediately after completion of the instant building is KRW 1,335,133,130 as shown in attached Table 1, and it should be deemed as the acquisition value of the instant land and building. Moreover, since the Plaintiff spent the instant building as capital expenditure from January 1, 2004 to ○○○○○○ as its capital expenditure on the instant building, as shown in attached Table 2, the Plaintiff should be reflected in the acquisition value.

B. Relevant statutes

Attached Form 4 shall be as listed in attached Table 4.

C. Determination

1) As to the first argument

In full view of the purport of arguments in Gap evidence 2 and Eul evidence 2 (including the number of each tax number), the defendant sent a notice of the disposition in this case to the plaintiff on March 6, 2017, stating the tax base, amount of tax to be determined or corrected, tax base, amount of tax to be assessed, calculation basis, and other matters prescribed by Presidential Decree to the taxpayer within 20 days from the date of completion of the tax investigation (when a tax official has completed the tax investigation, he/she explain to the taxpayer the results of the investigation including the details of the tax investigation, tax base, amount of tax to be assessed, amount of tax to be assessed, amount of tax to be assessed, amount of tax to be assessed, amount of tax to be assessed, corrected acquisition value and correction as follows, and then received it by the plaintiff on April 7, 2017, the defendant sent the notice of tax payment in this case to the plaintiff on April 12, 2017. The above notice of tax payment was received by the plaintiff's spouse on March 6, 2017.

2) As to the second argument

According to the statement Nos. 1-2 and 1-2 of the evidence Nos. 1-2, the Defendant calculated gains from the transfer of the real estate of this case by subtracting the ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ from the acquisition value of the real estate of this case, and then setting the amount of tax base by deducting the ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ from the transfer value of the real estate of this case, and then setting the amount of tax base by adding the calculated tax amount calculated by applying the transfer income tax rate to the calculated ○○○○○○○○○○○○○○○○ and the ○○○○○○○○○○○○ on an irregular tax basis. As such, this part of the Plaintiff’s assertion is without merit.

3) As to the third argument

A) Relevant legal principles, etc.

(1) In principle, the tax base and amount of tax should be determined by the actual amount revealed by the method of the on-site investigation, and it is exceptionally permitted only when there is no taxpayer’s account books or documentary evidence in order to determine it by the method of the on-site investigation, or when there is no other way for the tax authorities to disclose the actual amount of income without the credibility of the important portion being recorded therein or false. Thus, even if a taxpayer has no account book kept and recorded under the Income Tax Act, if the tax base can be calculated based on other documentary evidence, such as a contract, if the said tax base and amount of tax can be determined by the method of the on-site investigation and shall not be determined by the method of the on-site investigation (see, e.g.,

(2) Article 97(1) of the former Income Tax Act (amended by Act No. 13796, Jan. 19, 2016; hereinafter the same) provides that the necessary expenses to be deducted from the transfer value shall be the acquisition value (No. 1); capital expenses (No. 2); transfer expenses; etc. as prescribed by the Presidential Decree (No. 4); and where the actual transaction value at the time of acquisition cannot be verified, the acquisition value shall be the actual transaction value required for the acquisition of assets; and where the actual transaction value at the time of acquisition cannot be verified, the transaction example, appraisal value, or conversion value as prescribed by the Presidential Decree; Article 89 of the former Enforcement Decree of the Income Tax Act provides that the acquisition value of assets purchased from another person shall be the amount calculated by adding the acquisition tax, registration tax, and other incidental expenses to the purchase value; and the expenses incidental to the acquisition are the stamp tax

B) Determination

(1) In light of the above legal principles, the Defendant calculated the converted value (○○○○○○○○○○) by applying Article 97(1)1(b) of the former Income Tax Act as the acquisition value on the ground that the Plaintiff could not verify the actual transaction price at the time of the acquisition of the instant land at the time of the instant disposition, and the necessary expenses calculated by estimating the amount equivalent to 3% of the standard market price at the time of acquisition pursuant to Article 97(2)2 of the former Income Tax Act and Article 163(6) of the former Enforcement Decree of the Income Tax Act.

(2) However, comprehensively taking account of the Plaintiff’s evidence Nos. 5 through 9, evidence Nos. 11 (including various numbers), testimony by witnesses BB, and fact-finding results on DD, the Plaintiff entered into a sales contract with ○○○○○○○○ on October 17, 202 with regard to the instant land as security, and paid the full amount of the instant purchase price to ○○○○○○○○○○○○○○○○○○○○○○○ on December 16, 2016, by indicating the purchase price of the instant land as the purchase price of ○○○○○○○○○○○○○○○○○○○○ National Housing Bonds, and the Plaintiff’s allegation that ○○○○○○○○○○○○○○○○○○○’s purchase price of the instant land was indicated as the purchase price of the instant land as the purchase price of ○○○○○○○ National Housing Bonds on October 23, 2002.

(3) Therefore, the Plaintiff’s assertion on this part is with merit.

4) On the fourth argument

A) Relevant legal principles, etc.

(1) Article 97 (1) of the former Income Tax Act provides that "acquisition value, capital expenditure, etc. prescribed by Presidential Decree as necessary expenses to be deducted from the transfer value," and Articles 163 (3) 1 and 3, and 67 (2) of the former Enforcement Decree of the Income Tax Act provide that "expenses paid for the alteration, improvement, or convenience of the use of transferred assets" or "repair expenses disbursed to extend the service life of depreciable assets owned by a business operator or to increase the real value of the relevant assets, etc." Ultimately, in order to constitute capital expenditure, etc. as necessary expenses, the expenses for repair disbursed to extend the service life of transferred assets or to improve, improve, or convenience the use of the transferred assets shall be deemed as expenses prescribed by Presidential Decree.

(2) Even if the value of assets is entered in the book prepared and kept by the taxpayer, it cannot be deemed that such entry has an effect on determining the actual acquisition value of assets, and it cannot be deemed that such entry ought to be presumed as an actual acquisition value (see, e.g., Supreme Court Decision 87Nu536, Feb. 9, 198). Therefore, it is reasonable to recognize the book value as an actual acquisition value on the premise that the book value, in principle, conforms to the actual acquisition price.

(3) On the other hand, the burden of proof on the tax base, which is the basis of taxation in a lawsuit seeking revocation of the income tax disposition, is imposed on the tax authority, and the tax base is deducted from necessary expenses, so the burden of proof on revenue and necessary expenses is also imposed on the tax authority in principle. However, since the tax authority is in the territory controlled by the taxpayer, most of the facts generating necessary expenses are in favor of the taxpayer, and it is difficult for the taxpayer to prove it. Thus, if it is reasonable to have the taxpayer prove it in light of difficulty in proof or equity between the parties, it accords with the concept of fairness (see, e.g., Supreme Court Decision 2006Du16137, Oct. 26, 2007).

B) Determination

(1) In light of the above legal principles, the Plaintiff’s tax invoice Nos. 19, and Nos. 3 through 5 (including various numbers) was not prepared on the ground of the above ○○○○○ Construction Contract No. 2, and the Plaintiff did not obtain a construction permit for the instant building from ○○○○ Construction Contract No. 2 on December 4, 2002, and the Plaintiff reported the change of the building owner on December 26, 2002 to ○○○ Construction Contract No. 2. The Defendant did not obtain an approval for use of the instant building on November 21, 2003, on the basis of the following facts: (a) the Plaintiff’s tax invoice No. 2 and the construction site No. 3 of the instant building; (b) the Plaintiff entered the construction contract No. 2 as the owner, designer, and supervisor; and (c) the Plaintiff entered the standard construction contract No. 2, an internal building construction contract No. 3, which had been purchased on the basis of the above ○○○ Construction Contract No. 2.

(2) Meanwhile, the Plaintiff asserts that the amount stated in the attached Form 1 Construction Costs specification should be recognized as acquisition value of the land and the building in excess of the amount recognized by the tax invoice. However, in principle, the Plaintiff did not submit evidentiary documents, and the amount stated in the standard contract for private construction work contract between the Plaintiff and ○○○ Construction is included in the cost of construction work in the instant construction cost statement, notwithstanding ○○○○○○○○○○○○○○ (the tax amount related thereto is stated separately in the cost of construction work) and the contract amount stipulated in the sales contract for the land of this case, but it is difficult to believe that the amount stated in the above specification of construction cost is the actual acquisition value of the building, such as where the amount stated in the cost of construction work is appropriated as ○○○○○○○○○○ (the tax amount related thereto is stated separately in the public charge statement in the cost of construction work) and there is no evidence to acknowledge that the book value is a real acquisition value of the building in this case.

(3) In addition, although the Plaintiff alleged that the attached Form 2 was capital expenditure for the instant building, it is unclear whether the amount on the receipt presented by the Plaintiff alone was actually paid or not, and even if the amount was actually paid, it is also unclear whether it was paid to extend the service life of the instant building or to increase the real value of the instant building. Therefore, the Plaintiff’s assertion on this part is without merit.

(v)the calculation of a reasonable amount of tax;

The Defendant recognized the acquisition value on the basis of the conversion price on the ground that the actual transaction value of the instant land cannot be confirmed at the time of the instant disposition, but as seen earlier, it can be recognized that the actual transaction value of the instant land is ○○○○○○○○○○○○○○○○○○○, and thus, if the Plaintiff re-calculated the transfer income tax to be paid by the Plaintiff based on the acquisition value of the instant building, the reasonable tax amount shall be deemed as ○○○○○, as shown in the [Attachment 3] calculation of the transfer income tax amount. This is more than the Defendant’s correction and notification to the Plaintiff, and thus, the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.