Whether the transfer of ownership of real estate through the voluntary auction procedure constitutes “transfer” subject to capital gains tax (affirmative)

Even where the ownership of real estate is de facto transferred through the voluntary auction procedure, it constitutes a transfer of real estate subject to capital gains tax, and there are circumstances such as: (a) the establishment registration of a neighboring mortgage, which was the basis of the voluntary auction, guaranteed the property against the third party’s obligation; and (b) the owner did not pay dividends out of the auction proceeds, or the debtor was virtually unable to exercise the right to indemnity against the debtor due to the debtor’s insolvent, it is not subject to capital gains tax

Article 23 (2) of the former Income Tax Act (amended by Act No. 3271 of Dec. 30, 1980)

Supreme Court Decision 83Nu269 Delivered on February 28, 1984

[Judgment of the court below]

Head of Sungbuk Tax Office

Seoul High Court Decision 84Gu319 delivered on May 30, 1985

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

Even if the ownership of real estate is actually transferred at a cost through the auction procedure, it constitutes a transfer of real estate which is subject to capital gains tax (see Supreme Court Decision 83Nu269 delivered on February 28, 1984), and there are circumstances such as that the establishment registration of a mortgage, which is the basis of the voluntary auction, guaranteed the third party's obligation, and there was no money distributed to the owner out of the auction proceeds, or that the debtor's exercise of the right to indemnity against the debtor becomes virtually impossible due to the debtor's insolvent, it shall not be excluded from the subject of capital gains tax. The court below's decision to the same purport is just, and there was no error of law by misapprehending the legal principles or inconsistent reasoning, and the court below's decision did not err in the misapprehension of the legal principles as to the lawsuit and the reasoning of the court below's decision, and since Article 23 (2) of the Income Tax Act prior to the amendment by Act No. 3271 delivered on December 13, 1980, the amended provisions of the Act No. 12314.198.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Young-ju (Presiding Justice)