Whether the act of transferring land owned for a long time in installments can be seen as real estate sales business

The development activities that transfer land in installments shall not be deemed to be always established the relationship between the operation of real estate sales business and the operation of real estate sales business, and shall be assessed on a comprehensive basis depending on whether the act of transfer for the purpose of 'profit' and 'continctity' and 'retinctity' are business activities.

Article 19 of the Income Tax Act

1. The Defendant’s imposition of global income tax of KRW 56,920,740, global income tax of KRW 19,48,240, global income tax of KRW 2004, global income tax of KRW 28,457,120, global income tax of KRW 15,60,230, which belongs to the Plaintiff on January 5, 2006, and the disposition of increasing or decreasing the global income tax of KRW 28,457,120, global income tax of KRW 203, August 5, 2006, shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On January 10, 1973, the Plaintiff purchased and owned 3,435 square meters of the orchard of ○○○-si, ○○-si (hereinafter referred to as “one parcel of land”), and 2294 square meters of the orchard of 2294 (hereinafter referred to as “the two lands of this case”) around August 4, 1976, and reported the transfer income tax to the Defendant on March 20, 203, the Plaintiff divided the instant land into 8 and 2 lots of land (hereinafter referred to as “the instant land”) into 6 lots of land around March 20, 203, and divided the said land into 8 and 6 lots of land from July 2003 to February 204 (hereinafter referred to as “the instant transfer act”).

B. However, on the ground that the instant transfer act constitutes a real estate sales business rather than a transfer income, the Defendant issued a notice to the Plaintiff on January 5, 2006 of global income tax of KRW 56,920,740, global income tax of KRW 19,48,240 for the year 2003, and global income tax of KRW 19,48,240 for the year 2004. On August 5, 2006, the Defendant added the above tax amount to global income tax of KRW 28,457,120 for the year 203, global income tax of KRW 15,609,230 for the year 204 (hereinafter collectively referred to as “instant tax disposition”).

C. On March 27, 2006 and August 8, 2006, the Plaintiff filed a request for review with the National Tax Tribunal. However, the said Tribunal dismissed all of the Plaintiff’s request for review on November 17, 2006.

[Ground of Recognition] Facts without dispute, Gap evidence 1 to 4, Eul evidence 1 to 2 (including each number), and the purport of the whole and part of the evidence of Nos. 1 to 2 (including each number)

2. Summary of the parties’ assertion

A. The plaintiff

After the Plaintiff acquired the instant land, it was intended to dispose of it in order to repay its business debts in a wrusium continuously for about 30 years, but it was difficult for the Plaintiff to seek the purchaser due to excessive increase in the size, and it was only sold in lots without changing the land category of the instant land for the convenience of disposal, and it did not develop marginal profits or develop and sell real estate for business purposes. Thus, the income gained by the Plaintiff as the instant transfer act should be deemed as capital gains under Article 94(1) of the Income Tax Act. Accordingly, the instant taxation is unlawful since the Defendant imposed comprehensive income tax, which is not capital gains tax, by deeming it as business income.

B. Defendant

As long as the Plaintiff sold the instant land by dividing the instant land into 13 lots of private residential land and road at approximately 100 square meters, it shall be combined with the real estate sales business, which is part of the development activities of the land as provided by the General Rule 19-7(1)3 and (4) (see the relevant Acts and subordinate statutes 1.) of the Income Tax Act (see the content thereof). In addition, since the Plaintiff acquired or transferred real estate over about 30 times after 1981, other than the instant land, it can be deemed that the instant transfer act has continuity and repetition. Therefore, the instant taxation is lawful.

3. Grounds for determination

(a) Relevant statutes;

Attached Form 1.

(b) understanding of general rules 19-7(1)3 and (4) of the Income Tax Act;

(1) As seen earlier, the Defendant cited the above general provisions as the main basis of the instant taxation disposition, and the review and decision by the National Tax Tribunal seems to be based on the above provisions (Article 4-2(6) of the National Tax Tribunal). In other words, the Plaintiff’s act of transferring the instant land by dividing it into 14 lots constitutes “development of land” under the above general provisions, and thereby, should be evaluated as “business of real estate sales” under the Income Tax Act. Such assessment by the Defendant seems to be premised on the above general provisions as a legal order, which itself has its own normative power.

C. Determination of this case: The meaning of Article 19 of the Income Tax Act and Article 34 of the Enforcement Decree of the Income Tax Act

(1) The legality of the instant taxation disposition depends on the determination as to whether it conforms to the above law and the Enforcement Decree. Article 19(1)12 of the Income Tax Act provides for the income accrued from real estate sales business, which is one of the business income subject to income tax, as prescribed by the Presidential Decree, and Article 34 of the Enforcement Decree of the same Act provides that real estate sales business refers to the building construction business and the real estate supply business under the Korean Standard Industrial Classification. However, the Korean Standard Industrial Classification provides that the real estate supply business refers to the "industrial activities of selling and selling buildings, etc. constructed by granting a contract to the land of the farm, housing site, etc. and others, which are directly developed," but does not specifically provide for the operation of real

(2) Ultimately, whether the transaction of real estate constitutes a real estate sales business, which is a taxation requirement of business income, or is subject to transfer income tax, shall be determined according to ordinary social norms, considering the acquisition and holding status of real estate, existence of protocol, size of transfer, frequency, mode, other party, etc. of real estate, and whether the transfer is for profit-making purposes and the continuity and repetition of the degree that it can be seen as business activity. In making such determination, not only for the relevant transferred real estate, but also for the entire real estate owned by the transferor, but also for all the circumstances before and after the time the transfer took place (see, e.g., Supreme Court Decisions 2004Du3700, Apr. 24, 2001; 9Du5412, Apr. 24, 2001). In sum, whether the Plaintiff’s act constitutes a land development activity cannot be justified merely because it constitutes a "real estate development activity." The Plaintiff’s act of taxation in this case can be seen as a "business profitability" in light of the above legal principles.

(d) Facts of recognition;

(1) Around January 10, 1973, the Plaintiff purchased each land of this case, adjacent to the land of this case on or around August 4, 1976, and developed each of the land of this case into 100 square meters, with a scale inside and outside 100 square meters without changing the land category on or around June 20, 200, divided the land of this case into 8 lots, and divided the two land of this case into 6 lots, and sold 30,291 square meters in total from July 2003 to February 2004 as shown in the annexed Table 2, and divided 30,450,000 square meters in total into 7,450,000 won in total, and 00,001 Dong 239-8,316 square meters in 20,000 to 40,000 square meters in around 29, 204.

(2) The official land price prior to the subdivision of the instant land (based on January 1, 2003) is KRW 51,300 per square meter; the official land price after the subdivision (based on July 1, 2003) is KRW 50,300; and the official land price (based on July 1, 2003) of the land divided from the instant land is approximately KRW 45,000 to KRW 50,000. In addition, the official land price prior to the subdivision of the instant two land (based on January 1, 2003) and the official land price after the subdivision (based on January 1, 203) is equal to KRW 53,00 per square meter; and the official land price of the land divided from the instant two land (based on January 1, 2004) is about KRW 50,500,000 per square meter.

(3) As shown in the attached Table 3. The Plaintiff acquired real estate equivalent to a total of 13,292 square meters from March 1998 to February 2, 2004, including the previous and forest land, etc., six times from around March 198 to around February 2, 200, and transferred real estate equivalent to a total of 8,595 square meters over seven occasions. Since 1981, there was about 41 square meters (including the instant transfer act). From around 23 times in the transaction, approximately 23 times in the transaction had acquired real estate and owned it until now, and there was no sale of real estate acquired within a short period of less than one year.

(4) On the other hand, around November 27, 2002, the Plaintiff purchased 48,960,000 square meters of 00,000,000,001, 571-7,000,000,0000 won. In the process, around November 4, 2002, 320,000 won was loaned from ○ bank.

(5) Around January 9, 2004, around the time of the instant transfer, the Plaintiff established ○○○ World Co., Ltd. (business type: housing construction), but closed on June 30, 2005, and there was no business performance at all.

[Ground of recognition] Evidence Nos. 6 through 23 (including each number), Eul evidence Nos. 6, 10-2, each statement of witness Nos. 10-2, each testimony of the new witness ○○○ and Kim○○, the result of the on-site inspection by this court, and the purport of the whole pleadings

E. Determination as to whether the instant transfer constitutes a real estate sales business

In light of the above legal principles, it is difficult to view that the Plaintiff’s act of sale of the instant land was 70,000 won or less for the purpose of the sale of the instant land, on the ground that the Plaintiff’s act of sale of the instant land was 100,000 won or less for the purpose of the sale of the instant land, and thus, it was difficult to view that the Plaintiff’s act of sale of the instant land was 70,000 won or less for the purpose of the sale of the instant land, based on the following circumstances: (i) the Plaintiff’s act of sale of the instant land, which was 10,000 won or less for the purpose of the sale of the instant land, was 10,000 won or less for the purpose of the sale of the instant land; and (ii) the sale price of the instant land was 10,000 won or more for the purpose of the sale of the instant land, and thus, it is difficult to view that the sale price of the instant land was 10,000,000 won or more.

4. Conclusion

If so, the plaintiff's claim seeking the revocation of the taxation disposition of this case is reasonable, and it is so decided as per Disposition.

1.

public official law, order of law,

○ Income Tax

Article 19 (Business Income)

(1) Business income shall be the following incomes generated during the relevant year:

12. Incomes accruing from real estate sales business determined by the Presidential Decree;

○ Enforcement Decree of Income Tax

Article 34 (Scope of Real Estate Sale Business)

For the purpose of Article 19 (1) 12 of the Act, the term “real estate sales business as determined by the President” means the building construction business (limited to the case of self-construction and sale of a building) and real estate supply business under the Korean Standard Industrial Classification: Provided, That this shall not include the housing construction and sales business under Article 3

○ Korea Standard Industrial Classification

Supply of Real Estate

The term “industrial activities” means industrial activities that sell and sell land, such as farms, housing sites, industrial sites, etc., and buildings, etc. constructed by being awarded contracts to others. It includes resale without leasing or operating the purchased real estate.

○ Common Rules of Income Tax

19-7 [Classification of Business Types of Real Estate Sale Business, etc.]

(1) The scope of real estate trading business under Article 34 of the Decree shall be as follows:

1. Where real estate is sold or purchased at least once within a taxation period of one tax under the Value-Added Tax Act for the purpose of business by indicating the sale or purchase (including the cases of newly constructing and selling a building) of real estate or its brokerage for the purpose of business;

3. Where land is developed and sold in installments as a residential site, industrial complex, commercial building, cemetery, etc.;

(4) The term "development of land in the classification of real estate trading business" means all acts that cause a rational and efficient enhancement of the utility value of the relevant land by suspending, dividing, creating, altering, etc. a certain land.

2. The mark;

Location

(001 dong)

Area of a square meter;

Transfer Date

Transfer Amount

Jinay

2399-1

311

November 4, 2003

73 million won

2399-4

332

January 31, 2004

77 million won;

2399-5

308

August 11, 2003

70 million won;

2399-6

421

August 11, 2003

9,15 million won

2399-7

656

December 3, 2003

80 million won;

2294

425

September 3, 2003

86 million won

2294-1

13

July 4, 2003

2293-3 Land

Exchange

2294-2

347

February 2, 2004

6,8250,000

2294-6

443

February 2, 2004

8,7750,000

2294-5

348

September 3, 2003

70 million won;

Total

750,000,000 won (per m214,000 won)

3.

o In the future:

Location

Land Category

Area of a square meter;

Date of acquisition

Transfer Date

Grounds

○○1 Dong 2394-4

50

92

July 1, 1980

November 28, 2003

○○1 2393-1 Transfer to an access road to land

○○ 1664-1

?Electric field:

2,254

December 30, 1984

February 4, 2005

Sale to ○○-dong 1659-1 land owners without access roads to the land

○○ 1664-2

【Forest & orchard】

2,496

○○ 940-1

Forest land

943

may 13, 1998

July 28, 1999

Sale (Incorporation into ○○) due to the acquisition of public land by consultation;

○○ 940-2

Forest land

1,472

February 15, 2001

○○ 2684

Forest land

1,33

June 22, 1999

September 22, 2003

Sale as a parking lot site of a neighboring art gallery;

○○1 Dong 2293-6

Forest land

5

June 20, 2003

January 14, 2005

○ Incorporation into part of 2399-8 contributed to roads at ○○ City.

○○ 757

Forest land

4,744

February 27, 2003

Current Possession

Request for purchase by the owner of the above land who is the blind land

○○ 833

Forest land

4,795

February 2, 2004

Current Possession

Request for purchase by the owner of the above land who is the blind land