Examination Transfer 2009-0102 ( November 04, 2009)

Whether the transfer of forest trees can be seen as business income;

Even if an agreement was reached to purchase forest and forest trees separately at the time of a real estate sales contract, and the value of forest and forest trees is specified through appraisal, it cannot be deemed that the transfer value of forest and forest land is separately transferred.

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

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

The Defendant’s disposition of imposition of capital gains tax of KRW 205,574,080 for the Plaintiff on March 2, 2009 is revoked.

1. Circumstances of the disposition;

A. On May 9, 2008, the Plaintiff transferred the share of KRW 17,648/25,913 (hereinafter “the instant forest land”) of KRW 112,000,00,000,000,000 to ○○○○○-dong 332-47 forest land and KRW 15,000,000,000,000,000 won (hereinafter “the instant transfer”).

B. On August 7, 2008, the Plaintiff made a preliminary return on the tax base of capital gains as KRW 1,151,224, the amount of capital gains tax calculated by adding the transfer value of forest to KRW 15,91,066 and the acquisition value thereof to KRW 11,028,321 pursuant to Article 51(8) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010; hereinafter the same) on the ground that income from the transfer of forest of this case among the income from the transfer of forest of this case was not subject to capital gains tax, on the grounds that such income does not constitute business income.

C. Accordingly, on March 2, 2009, the Defendant issued a disposition to rectify and notify the transfer income tax of KRW 206,725,300 calculated by applying the entire transfer value of forest land and forest trees to the transfer value of the instant forest, on the grounds that the income from the transfer of forest trees cannot be deemed as business income due to the distinction between the transfer value of forest land and forest land in the instant case and the transfer value of forest trees, etc.

D. On April 21, 2009, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service on April 21, 2009, and received a decision of dismissal on November 4, 2009.

E. Around June 2010 when the lawsuit of this case was pending, the Defendant revised the transfer income tax of this case to KRW 205,574,080 after subtracting the Plaintiff’s already paid KRW 1,151,220 from the amount of KRW 206,725,30, which was corrected and notified as stated in the foregoing paragraph (c) (hereinafter “instant disposition”).

[Ground of recognition] Class A evidence Nos. 1, 2, Eul evidence Nos. 1 and 8, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

In order to produce landscape trees, the Plaintiff managed forest trees by using access roads and stone construction works, underground water development works, removal of miscellaneous and miscellaneous trees, etc., with the intention of producing landscape trees, etc. on the instant forest land. Since the Plaintiff classified the value of forest trees in the instant forest by specifying the value of forest trees through appraisal after the transfer of the instant forest through an agreement with the Nonparty Company, the transfer value of forest land in the instant forest is deemed as business income, the Defendant’s disposal of the instant forest in the instant forest is unlawful, even though the value of forest trees in the instant forest can be deemed as business income.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) The Plaintiff was subject to registration conversion on June 1, 2006, with respect to the above ○○○○ 332-47 forest land 26,118 square meters, and was divided into 15 square meters and 332-47 forest land and 15 square meters on the same day.

(2) Before the divorce on April 30, 204, the Plaintiff, a husband, donated the forest land of this case, which is part of the above ○○○-1,00,000 square meters and 15 lots of land divided as above, to the non-party company around May 9, 2008. On the other hand, the forest land of this case is not separately planted but naturally created.

(3) The primary party to the sales contract for the instant forest was the Plaintiff and △△ Construction Co., Ltd., and thereafter the Nonparty Company succeeded to the status of △△ Construction Co., Ltd. and became the transferee of the instant forest.

(4) The Plaintiff and △△ Construction Co., Ltd. agreed to sell the instant forest at KRW 1120 million without distinguishing the transfer value of the forest land and the forest trees from each of the transfer values, based on the forest land and the forest trees as a package of sale objects, and thereafter, the Plaintiff and △△ Construction agreed to sell the purchase price at KRW 1.12 million. The aforementioned content of the agreement was succeeded to the non-party company as it is and paid to the Plaintiff by May 9, 2008, which

(5) Article 7(2) of the sales contract between the Plaintiff and △△ Construction Co., Ltd. provides that the right of trees, such as crops and trees planted on the subject matter of sale, shall be included in the real estate sales price, and all rights shall belong to △△ Construction Co., Ltd.

(6) As above, the statement of calculation of transfer margin submitted by the Plaintiff while filing a preliminary return of transfer income tax base is indicated as "calculated as a provision under Article 51 (8) of the Enforcement Decree of the Income Tax Act because the price of the forest and land is unclear."

(7) Meanwhile, the agreement on the real estate sales contract between the plaintiff and the non-party company on May 2, 2008 states that Article 7(2) of the "Real Estate sales contract" states that the right to tree trees, such as crops and trees, listed on the subject matter of sale and purchase shall be included in the real estate sales price, and that the right to tree trees, such as crops and trees, listed on the subject matter of sale and purchase shall be included in the real estate sales price, and that the amount of land shall be calculated by subtracting the value of pine trees appraised by a certified appraiser or certified damage adjuster from the total purchase price and shall be changed to the price of land.

(8) On July 17, 2008, 2000, the “Report on the Evaluation of So-ri-ri-ri-ri-ri-ri-ri-ri-ri-ri-ri-do ○○○○○○○-do, which was conducted on July 7, 2008 by the Seoul Special Self-Governing Province (ju), the appraised value of 2,300 shares of small trees worth the ornamental value of 3,835 shares of 3,835 shares, shall be KRW 960,397,00.

(9) In making a request for examination of the instant disposition, the Plaintiff submitted a written confirmation of the execution of construction works or receipts under the name of the construction business operator, including the removal and dumpation of trees from July 1, 2004 to March 31, 2005, and from August 2004 to March 31, 2005, and from August 2004 to March 2005, which are the land prior to the division of the instant forest, etc.

(10) On the other hand, as of June 30, 2008, the standard balance sheet, etc. of the non-party company is the non-party company that registered the real estate consulting business as its main business, and the non-party company purchased the forest of this case for the development of golf courses and then appropriated the total acquisition value of the forest of this case in the land account on the above balance sheet.

(11) The Plaintiff had no fact of filing for registration of a forestry-related business entity before transferring the forest land of this case.

[Ground of recognition] Evidence Nos. 1, 5, Evidence Nos. 3-1 through 4, Evidence Nos. 4-1, 2, Evidence Nos. 2 and 3-1, 2, Evidence Nos. 4-1 through 3, Evidence Nos. 5, and the purport of the whole pleadings

D. Determination

(1) According to Articles 4(1)1 and 3, 19(1)1, and 94(1)1 of the Income Tax Act, income generated from forestry falls under business income which is subject to global income tax, and income generated therefrom falls under capital gains tax, which is subject to capital gains tax. Meanwhile, Article 51(8) of the Enforcement Decree of the Income Tax Act provides that income generated from the transfer of forest trees along with the forest land shall not be included in the calculation of gross income when calculating the income amount from the business felling or transferring the forest land. In light of the above provisions, where the forest land and its fixed trees are transferred together with the forest land, the income from the transfer of the forest land shall not be included in the calculation of gross income amount. Accordingly, in light of the aforementioned provisions, if the forest land and its fixed trees are transferred together, it shall not be subject to capital gains tax or business income generated from the transfer of the forest land pursuant to the general provisions of Article 51(8) of the Enforcement Decree of the Income Tax Act, and the tax authority’s interpretation and calculation of the basic tax law should not be based on the basis 20-1).

(2) According to the above facts, although the plaintiff specified the forest value of the forest of this case through appraisal after the transfer of this case, it cannot be deemed that the transfer value of the forest of this case was separately transferred, and even if the plaintiff was engaged in the development and utilization of groundwater in the forest of this case as above in the forest of this case, it is difficult to view that the plaintiff continuously and repeatedly conducted afforestation or growing, or engaged in forestry as part of the business for profit-making purposes. Therefore, the above real estate sales contract agreement, the appraisal report by the appraisal corporation of this case, and the above construction work alone cannot be deemed to have been engaged in forestry at the time of the transfer of this case, nor any other evidence to acknowledge this cannot be deemed to have been found otherwise. Thus, the transfer value of the forest of this case cannot be deemed to have been classified into the transfer income of the forest of this case as the business income of the forest of this case and the business income of the forest of this case.

Ultimately, since the entire income generated from the transfer of this case is subject to the transfer income tax, the plaintiff's assertion is without merit, and the defendant's disposition of this case is legitimate.

3. Conclusion

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