National Tax Service Review and Transfer 2007-0167 (No. 18, 2008)

When selling partnership property and receiving sales proceeds, capital gains is attributed to partners according to the ratio of sharing profits and losses.

If a person who sold the property of the partnership and received the right to receive the purchase price from the partners who conduct a joint business sells the property of the partnership and received the purchase price, the effect of the transfer income is on all the partners, so it shall be deemed that the transfer income belongs to the partners according to the ratio of sharing profits and losses.

208Gudan2365 Revocation of Disposition of Imposing capital gains tax

Hongx

Head of Sungnam Tax Office

July 15, 2011

September 16, 2011

1. The Defendant’s disposition of imposing capital gains tax of KRW 437,536,692 against the Plaintiff on December 6, 2006 exceeding KRW 119,214,00 among the disposition of imposing capital gains tax of KRW 437,536,692 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 70% is borne by the Plaintiff, and the remainder is borne by the Defendant.

The Defendant’s imposition of KRW 1,028,685,490 against the Plaintiff on December 6, 2006 shall be revoked.

1. Details of the disposition;

A. The director of the Central Regional Tax Office found, as a result of the investigation of Nonparty XX General Construction Co., Ltd. (the trade name before the change is referred to as "OO industry development corporation"; hereinafter referred to as "non-party company"), that the non-party company filed a complaint with the non-party company on the transfer price of KRW 5.3 billion (the transfer price of KRW 1.884 million, the acquisition price of KRW 105 million, the acquisition price of KRW 1050 million, and the corporate tax of KRW 200,000,000,000 from January 2, 2002 to August 2, 200, the non-party company filed a complaint with the non-party company for the omission of the report on the non-party company's transfer price of KRW 20-0,000,000,000,000 for the same 0-0,000,000 won.

B. The violation of the Act on the Aggravated Punishment, etc. of Specific Crimes (Tax) was prosecuted and tried by Suwon District Court 2005 Gohap304. On September 25, 2006, when the trial was in progress on September 25, 2006, the court of first instance agreed to purchase each of the instant land in the name of the non-party company and to distribute the benefits of the joint project in proportion to the equity ratio, and subsequently, paid the down payment to the non-party company, while transferring the right to acquire each of the instant land to the △△△ Industrial Development Co., Ltd. (hereinafter referred to as the "△△△ Industrial Development"), Korea transferred the right to acquire each of the instant land to the non-party company △△△△△ Industrial Development Co., Ltd. (hereinafter referred to as the "△△△ Industrial Development"), the facts charged were modified. The above court sentenced the imprisonment with prison labor for two years and the fine for the changed facts on November 1, 2006.

C. Around May 2006, the director of the Central Regional Tax Office: (a) investigated the actual transfer value of each land of this case as KRW 18 billion (7.4664 billion in the transfer difference) as a result of a tax investigation conducted on behalf of △△ Industrial Development, a transferee of each land of this case; (b) revoked the corporate tax for the business year of the above 2002 business year imposed on the company of the non-party; and (c) notified the Defendant of taxation data, such as a written decision on capital gains tax for KRW 1.642 billion in the transfer difference of each land of this case, which is the amount equivalent to the Plaintiff’s share (2.2%)

D. Accordingly, on December 6, 2006, the Defendant rendered the instant disposition that determined and notified the Plaintiff’s total amount of KRW 1,028,685,490 (the amount deducted from KRW 275,628) of KRW 591,424,428, and the Plaintiff’s total of KRW 437,536,692 (additional tax on negligent tax returns, KRW 59,025,059, KRW 378,511,633) for the transfer of each of the instant land based on the foregoing taxation data.

[Ground of recognition] Facts without dispute, Gap evidence 1-1, 2, Gap evidence 2, Gap evidence 4-2, Gap evidence 26, Eul evidence 2-5, Eul evidence 2-5, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the actual acquisitor and transferor of each of the instant lands are the ▽▽△△ Development Co., Ltd. established pursuant to the joint project agreement by the Plaintiff, etc. (hereinafter referred to as the “detailed development”), the instant disposition, which deemed the Plaintiff as the person to whom capital gains accrue, is unlawful as it violates the principle of substantial taxation.

2) Even if the Plaintiff et al. is the acquisitor and transferor of each of the instant lands, the Plaintiff et al. terminated a partnership relationship under a joint project agreement on April 30, 2002 after the conclusion of the resale contract on each of the instant lands, and at the same time, concluded the entire resale profits (14.84 billion won = 14.884 billion won - 10.54 billion won), calculated net profits excluding all transaction expenses, such as taxes, public charges, etc., as 2.5 billion won, and calculated the Plaintiff and RedB’s share ratio (1 billion won, 550 million won, respectively) in proportion to the share ratio of the Plaintiff and RedB, and thus, the Plaintiff et al. still acquired shares in the instant joint project after the conclusion of the resale agreement on August 29, 200, on the premise that the agreement on distribution of profits and losses was unlawful, as the Plaintiff’s right to claim the said joint project from the Plaintiff, other than the agreement on distribution of profits and losses, was still unlawful.

3) Even if there exists a claim against the Plaintiff for distribution of profits against the Plaintiff, the Plaintiff and RedB among the proceeds from the resale of each of the instant land, accounts for the remaining amount paid to the Plaintiff and RedB as the representative director of the Nonparty Company’s company’s revenues, and completely used them as the construction fund of the building in the building in which the Nonparty Company was newly built. At present, the Plaintiff was sentenced to heavy punishment in a criminal case without any property owned, and was sentenced to a punishment in a criminal case, and had no ability or intent to pay the Plaintiff additional proceeds during the re-sale. Therefore, there is no possibility that the Plaintiff may realize the right to claim distribution of profits against the Plaintiff, and the instant disposition

4) Even if the Plaintiff did not report and pay the cash custody certificate from Han on April 30, 202, because Han had promised to assume the responsibility of the non-party company for all taxes, etc. related to the transfer of each land of this case at the time when the Plaintiff received the cash custody certificate from Han on April 30, 2002, the Plaintiff believed that the horse was liable for the non-party company, and the Plaintiff’s transfer margin of 3.5 million won [=50 million won - 200 million won (the HongB under the joint business agreement agreed to invest KRW 60 million in the Plaintiff for the reasons of short of funds, but the Plaintiff invested KRW 100 million in addition to KRW 10 million). The Plaintiff did not know of the fact that the transfer margin was more than 2.5 billion in the criminal trial process of Han's tax evasion case after four years from the date on which the cash custody certificate was prepared, the portion of the transfer margin in this case’s additional statement that did not have been paid for the above amount exceeding 500 million won.5 billion won.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) On December 11, 2001, the Plaintiff and RedB agreed to purchase each of the instant lands and to engage in the new construction and sale of main apartment complex/officetel on the land on the same ground. HanB is responsible for entering into a sales contract for each of the instant lands and the payment guarantee for construction works, and HongB bears the burden of KRW 100 million for the project site deposit and KRW 100 million for the additional expenses, and the Plaintiff is responsible for the authorization and permission business, such as building permission, but the Plaintiff is responsible for providing additional expenses. The Plaintiff is determined as KRW 38%, HongB 40%, and Plaintiff 22%, and concluded a joint business with the new corporation that established a new corporation that applied the relevant shares ratio and to distribute the profits in proportion to its ratio of shares.

2) In accordance with the aforementioned joint venture agreement, the Plaintiff paid KRW 100 million to Han on December 11, 2001, which was on the date of the agreement, to Han on the same day, and HongB wired the total of KRW 6.20 million to Han on the same day. The Plaintiff et al. did not establish a new corporation until the time, and concluded a sales contract for each of the instant lands from △ Electronic, etc. on December 11, 2001, including the down payment amount of KRW 10.554 billion, which was on the date of the agreement, in the name of the non-party company, and paid the down payment. The Plaintiff et al., established the TPP, on December 26, 2001, which was after the said sales contract was concluded, established with HongB and HanB, as a joint representative for development of ▽▽. The Plaintiff et al., prepared a register of shareholders in accordance with the ratio of shares in the joint development agreement, and completed the real estate development project.

3) After that, the Plaintiff et al. concluded that it was impossible to obtain a building permit for a building with at least 10 floors on each of the instant land due to impossibility to obtain a building permit for each of the instant land, and concluded that there was no feasibility of the construction and sale of a main apartment complex/office building, and concluded a business agreement with the Plaintiff et al. to resell each of the instant land and distribute profits after deducting profits from the gains and

4) As a result, Han made efforts to sell each of the lands of this case, on January 28, 2002, 4.1 billion won for the instant 0-0 land; on February 6, 2002, 5.584 billion won for the instant 0-0 land; on June 18, 2002, the seller entered into a sales contract with 6.0 billion won for the instant 0-0 land; on June 18, 2002, the seller entered into a sales contract with 6.0 billion won for the instant 0-0 land; the purchaser entered into the sales contract with 6.0 billion won for each of the instant 20-0 E-200 billion won for the instant land; on the other hand, the seller entered into the sales contract with 6.0 billion won for the instant 20-00 billion won for the instant land; on the other hand, the actual purchaser entered into the sales contract with 200-00 billion won for the instant 25.27.27.200

5) On April 30, 2002, the plaintiff et al. prepared a cash custody certificate to distribute the profit amount of 2.5 billion won from the resale of each of the lands of this case to "F 9.5 billion won (38%), RedB 1.0 billion won (40 billion won in equity ratio), and plaintiff 5.5 million won (22% in equity ratio)". The cash custody certificate was first prepared by Han, and signed by the plaintiff et al. on August 29, 2002, "The amount of money set forth above is to be paid to HongG, HongBB, and the total amount of money set forth above to be paid to the 500 billion won in equity ratio, and the amount of money set to be paid to the 200 billion won in total to the plaintiff et al. al. 29, 2000, and each of the plaintiff et al. issued al. al. al. 2000,000 won to the 205 billion won.

6) After having been convicted of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (tax) at the Suwon District Court, the Suwon District Court appealed as Seoul High Court 2006No2609. However, on May 13, 2009, the above court was convicted of evading capital gains tax of KRW 2,83,820,175,200 due to the Defendant (A), despite the occurrence of KRW 2,820,000 of the transfer price of each of the instant lands of this case on May 13, 2009. However, in the appellate court, the appeal became final and conclusive on July 203, 200, which became final and conclusive on the ground that the appeal was dismissed by omitting the subsequent report.

7) However, with the fact that HongB attended and testified as a witness in the above criminal trial against Korea, it became aware that the profits accrued from the resale of each of the instant lands exceed 2.5 billion won, and that HongB provided the Plaintiff with the benefits equivalent to one’s own shares. On July 5, 2006, upon the Plaintiff’s accusation against embezzlement, the Plaintiff became aware of the fact that the said proceeds exceed 2.5 billion won.

8) In the above accusation case, on November 15, 2006, HongB, who was subject to the disposition of non-prosecution on the charge of the plaintiff's non-prosecution on November 15, 2006, filed a complaint against the plaintiff on the charge that the plaintiff again received 1.7 billion won equivalent to one's own share of the proceeds from the resale of this case from Korea (the plaintiff was issued a non-prosecution disposition that was later suspected of being suspected of being suspected) (the plaintiff filed a complaint against the defendant on January 29, 2007 on the charge of embezzlement of the proceeds from the resale of this case by Han on the charge of embezzlement of the proceeds from the resale of this case (the HongB also filed a complaint against the HongB on May 3, 2007). On July 3, 2009, the branch office of the Suwon District Prosecutors' Office which investigated the above embezzlement case was indicted separately from the case in violation of the Act on the Aggravated Punishment, etc. (the crime of embezzlement).

9) In the case of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) in Suwon District Court Decision 2009Dahap43, which was prosecuted as above, the same court recognized the crime of embezzlement of KRW 1,765,60,00 and KRW 826,00,00 of the resale gains (transfer margin) to be distributed to HongB to the Plaintiff by Han on November 19, 2010 and the resale gains to be distributed to the Plaintiff (transfer margin) to the Plaintiff, and sentenced the judgment to be sentenced to three years of imprisonment. After that judgment, the judgment became final and conclusive (According to the above judgment, Han paid to the Plaintiff KRW 3.4 billion on July 15, 200, KRW 250,000,000,000,000,000,000 won, including KRW 3.4 billion on July 23, 200,000,000,000 won, as otherwise alleged by the Plaintiff.

[Ground of recognition] The purport of Gap evidence Nos. 6-1 to 17-3 Gap evidence Nos. 21, 22, 23, 25, 26, and Eul evidence Nos. 2 through 5

D. Determination

1) As to the Plaintiff’s first argument

According to the above facts, the plaintiff et al. acquired each of the lands of this case after entering into a joint project agreement and entered into a sales contract under the name of the non-party company operated by Korea-A, not a new corporation under the above joint project agreement. Since it was difficult to implement the project with respect to the issue of building permission, etc., the actual purchaser and transferor of each of the lands of this case shall be the plaintiff et al., and the person who belongs to the gains from the purchase or transfer of each of the lands of this case shall be the plaintiff et al., and there is no evidence to prove that the development was involved in the purchase or transfer of each of the lands of this case. Rather, each of the lands of this case can only be recognized that the plaintiff et al. purchased each of the lands of this case in the name of the non-party company and transferred it in the name of the non-party company, it cannot be deemed that the gains from the transfer of each of the lands of this case belongs to the non-party company. Accordingly, since the plaintiff belongs to the actual purchaser and transferor of each land

2) As to the second argument of the Plaintiff

According to the above facts, when the sales contract for each of the lands of this case was concluded (However, the sales contract for each of the lands of this case was concluded after the preparation of a cash storage certificate, and the new contract was concluded). According to the purport of the entire pleadings, it is insufficient to recognize that the Plaintiff and Han-A had cancelled the agreement on the payment of gains on transfer until the criminal trial for the tax evasion case of Han-A after the preparation of the above cash storage certificate was in progress. However, it is insufficient to find that the Plaintiff had no legal dispute over the payment of gains on transfer, even though it was acknowledged that there was no possibility that the agreement was concluded at the time of the preparation of the above cash storage certificate (the above fact that the number of purchase proceeds from the resale of each of the lands of this case was not completed, and that at the time, Han-B had the right to purchase and resale of each of the lands of this case under the premise that it was no longer necessary to acknowledge the Plaintiff’s right to receive additional funds on the premise that the Plaintiff had received additional funds on the ground that there was no reason to acknowledge’s profits on the above distribution of money distribution.

3) As to the third argument by the Plaintiff

If a person who sells partnership property from partners conducting a joint business and obtains the authority to receive the purchase price from a third party concludes a sales contract to sell partnership property with the third party and receives the purchase price, the sales contract and the validity of the receipt of the purchase price shall be deemed to have accrued to all partners. Accordingly, the transfer income accrued from such transfer shall be deemed to have accrued according to the ratio of profit and loss distribution to all partners. Subsequent, whether the purchase price has been actually distributed to partners according to the ratio of profit and loss distribution and whether it has been used for the union members is merely an issue that must be resolved among the union members, and it shall not be directly affected by the occurrence of transfer income (see Supreme Court Decision 89Nu7306, Sept. 28, 1990). Meanwhile, even if a right which has no real income has been finally and conclusively generated without any income, it shall be deemed that the income has been realized, and it shall be objectively determined that the claim subject to taxation has no possibility of realizing the future income due to the debtor's bankruptcy, etc., and that the income tax should be imposed on 104.

Accordingly, as to the instant case, since Korea-A, which led to the resale of each of the instant lands, sells each of the instant lands to △△ Industrial Development and received the sales proceeds therefrom, the sales contract and the validity of the receipt of the sales proceeds are reached for all the union members including the Plaintiff, etc., the transfer income accruing from such transfer shall be deemed to have accrued according to the ratio of profit and loss distribution to all the union members including the Plaintiff, etc., and the same applies to the transfer income of the instant 00-0 land sold after the cash storage certificate was prepared. Therefore, as Korea-A receives the sales proceeds, as long as the transfer income is realized in reality even to the Plaintiff upon receipt of the sales proceeds, and the transfer income belongs to the Plaintiff according to its equity ratio, whether there is a possibility of realizing the right to claim profit distribution against Korea-A is irrelevant to the realization of the transfer income tax, and thus, the Plaintiff’s above assertion does not have any reason to see it (i.e., the lack of possibility of realizing the right to claim profit distribution).

4) As to the plaintiff's fourth argument

In order to facilitate the exercise of the right to impose taxes and the realization of tax claims, penalty taxes are imposed on taxpayers who violate various duties, such as reporting and tax payment, as prescribed by individual tax-related Acts and subordinate statutes without justifiable grounds, and the taxpayer’s intentional or negligent negligence is not considered: Provided, That in cases where there is a justifiable reason that it is unreasonable for taxpayers to believe that they did not know of their duties, and there is a circumstance that it is unreasonable for them to expect the parties to fulfill their duties or that it is unreasonable for them to expect to fulfill their duties, etc., penalty taxes may not be imposed (see, e.g., Supreme Court Decision 93Nu6744, Jun. 8, 1993).

The penalty tax on the portion of KRW 450 million (i.e., KRW 50 million - KRW 100 million) on the instant case at the time when the Plaintiff entered into a cash storage certificate on April 30, 2002 (i.e., KRW 550 million - KRW 100 million) is imposed on the Plaintiff, even though HanA or the Non-Party Company was liable for all the taxes on the transfer of each of the instant land, insofar as the Plaintiff did not report, pay, even though it was aware that such transfer has occurred, it shall be liable for penalty tax as a sanction for the failure to report, report, or pay (the Plaintiff asserts that the actual amount of the instant joint business agreement is KRW 350 million,000,000,000,000,000,000,000,0000,000,000,000,000,000).

However, the additional tax on the difference in transfer exceeding KRW 450,000,00 not indicated in the above cash custody certificate is acknowledged based on the facts acknowledged earlier and the purport of the entire pleadings, namely, the Plaintiff did not know the fact that the proceeds from the resale of each of the land of this case exceed KRW 2.5 billion at the time of the preparation of the above cash custody certificate. At the time of the preparation of the above cash custody certificate, the Plaintiff promised to assume the entire liability for taxes and taxes for the resale of each of the land of this case. The Plaintiff became aware only of the fact that the actual difference in transfer exceeds the above KRW 2.5 billion during the criminal trial of Korea-A after the lapse of four years from the date of the above cash custody certificate. The Plaintiff did not know the Plaintiff that the transfer income from the transfer of each of the land of this case was generated from the income of the non-party company, and later revised the transfer income tax amount to the Plaintiff, etc. at the time of the execution of the tax investigation on the development of △△ industry, or that there was no justifiable reason for the transfer amount exceeding KRW 464.5 billion.

Therefore, among the capital gains tax on the disposition of this case, the part exceeding KRW 119,214,00 (see attached Table of calculation of additional tax) that falls under the Defendant’s decision from June 1, 2003 to December 1, 2006 as of June 1, 2003, following the date following the period for filing the final return of tax base of the capital gains tax of this case on the capital gains of KRW 450,00 from the transfer of each of the land of this case, is unlawful. Thus, the Plaintiff’s above assertion is justified within the above scope of recognition

3. Conclusion

Therefore, the plaintiff's claim on the portion exceeding KRW 119,214,00 out of the capital gains tax of this case is reasonable. Thus, the plaintiff's remaining claims (the principal tax of capital gains tax and the portion of the capital gains tax of KRW 119,214,00) are dismissed. It is so decided as per Disposition.