Whether the transfer of land by dividing it into several parcels can be seen as real estate sale business;

Although it is inevitably divided and transferred for the purpose of selling land, it is sufficient to view it as running business with continuity and repetition of business activities if comprehensive consideration of the terms and conditions of the contract concluded with the real estate broker in the course of selling land, details of the actual transfer, and access road construction.

Article 19 (Business Income)

Article 34 (Scope of Real Estate Sale Business)

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

The Defendant’s imposition of global income tax of KRW 133,098,210 on April 5, 2006 against the Plaintiff on April 5, 2006 and the imposition of global income tax of KRW 14,08,530 on global income for the year 2004 is revoked.

Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On October 17, 1973, the Plaintiff purchased and owned ○○○○○-3 orchard 8,731 square meters (hereinafter “instant land”). On July 7, 2003, the Plaintiff divided the instant land into 15 parcels and transferred 13 parcels of the said divided land to another person (hereinafter “the instant transfer act”) during the period from August 2003 to January 2004, and reported and paid transfer income tax to the Defendant.

B. However, on April 5, 2006, the Defendant imposed the Plaintiff global income tax of KRW 133,098,210, and global income tax of KRW 14,088,530 for the year 2004, respectively (hereinafter “instant taxation”).

C. On May 25, 2006, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service, but the Commissioner of the National Tax Service dismissed the said request on January 10, 2007.

[Reasons for Recognition] Unsatisfy, Gap evidence 1-2, Gap evidence 2, Eul evidence 1-1 and Eul evidence 1-2

2. Summary of the parties' arguments

A. The plaintiff's assertion

The plaintiff continued to operate a crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crusal crus, but since the 199s crusal crusal crusal crusc crusc cruscs

B. Defendant’s assertion

As to this, the Defendant asserts that the instant tax disposition is lawful, since the Plaintiff’s development activities of land under the General Rule 19-7(1)3 and (4) of the Income Tax Act (see attached Table 1. related Acts and subordinate statutes) fall under real estate sales business, so long as the Plaintiff developed and purchased the land, such as dividing the instant land into 15 lots through a real estate broker and installing roads and water supply and sewerage facilities which are not superior to the purpose of the orchard.

3. Grounds for determination

(a) Relevant statutes;

Article 19 (Business Income)

Article 34 (Scope of Real Estate Sale Business)

B. Ground of determination on the legitimacy of the instant taxation disposition

(1) First, Article 19-7 (1) 3 and (4) of the General Rules of the Income Tax Act, which the Defendant mainly uses as the main basis for the instant taxation, is merely an administrative rule that issued an interpretation and enforcement guidelines regarding the meaning of “real estate sales business” under Article 19 of the Income Tax Act within the tax authority (see, e.g., Supreme Court Decision 2005Du5611, Feb. 8, 2007). It cannot be said that the instant transfer constitutes real estate sales business.

(2) Article 19 of the Income Tax Act and Article 34 of the Enforcement Decree of the Income Tax Act

The legality of the instant taxation disposition should be determined by 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 as one of the business income subject to income tax, and Article 34 of the Enforcement Decree of the same Act provides for real estate sales business refers to the building construction business and the real estate supply business under the Korea Standard Industrial Classification. However, the Korea Standard Industrial Classification provides that real estate supply business refers to the "industrial activities of selling in lots and selling buildings, etc. constructed by giving a contract to land of farm, housing site, etc. and others, which are directly developed," and does not provide for specific matters as to whether real estate transactions are engaged in real estate sales business in any specific case. Thus, whether the transaction of real estate constitutes real estate sales business, which is a taxation requirement for business income or is subject to capital gains tax should be determined by considering the transferor's acquisition and possession of real estate, the existence of such transfer, the scale and frequency of transfer, the degree of continuity of business activities, etc., as well as the transfer period of 2040.

4. Determination

(a) Facts of recognition;

(1) On October 17, 1973, the Plaintiff purchased the instant land and operated the instant land as a crusium with a crusium directly or through a crusium and a stronger. Since 1999, the crusium price has crusium due to a crusium decline in the crusium and the crusium policy has become difficult to operate the orchard because the crusium price has crusium and the crusium policy has been implemented. Around 2001, the Plaintiff laid down the instant land as a re

(2) However, as the Plaintiff did not find a purchaser of the instant land for about one year, around June 2, 2003, the Plaintiff entered into a delegation agreement on the instant real estate disposition (hereinafter “instant delegation agreement”) with the representative of ○○○ Licensed Real Estate Agent Kim ○○, and its main contents are as follows. Accordingly, the entire transfer of the instant case took place by Kim○-owner, and in the process, the sales advertisement was also published by designating the instant land as the house site for electric source in the daily information area.

① The Plaintiff shall delegate the right to sell the instant land to Kim○-ju in an adequate size, and Kim○-owner shall secure at least two billion won with the purchase price of the instant land, and where the purchase price exceeds two billion won, the Plaintiff shall set the excess amount to Kim○-ju within the maximum of 150 million won with remuneration and other expenses. Provided, That where the excess amount exceeds 150 million won, the parties shall consult with each other.

(2) All the expenses incurred in the sale of the land in this case and the expenses incurred in the division and access road packaging, waterworks and sewerage construction, etc. shall be borne by Kim○-owner, but the receipt and evidential documents shall be kept and presented at the request of the

(3) After that, on July 7, 2003, the Plaintiff divided the instant land into 15 lots as shown in the annexed Table 2. From August 2003 to January 2004, the Plaintiff sold at KRW 1,854,440,00 in aggregate the said divided land for KRW 13 parcels from August 2003 to January 200. Of them, the attached Table 2. The real estate sales contract (Evidence 8-1) with the real estate purchaser of ○○○○○-3, 02 Dong-dong 2, 000 in the attached Table 2. states that "the remaining payment is made after receiving the change in the form and quality of the land and the construction permit in the name of the contractor", and the real estate sales contract (Evidence No. 8-2 through 6, 8 through 12) with most buyers shall be made by donation from the side of the seller to the road package.

(4) On the other hand, on September 2004, the buyer changed the land category of the land of 002 Dong-dong, Jeju-si, which he purchased, to a site. The plaintiff, after the division, donated the land of 002 Dong-dong, 00-18 Dong-gun, 766 square meters to Jeju-si, which was indicated in the table No. 2, to a road. The above road is connected to the main part of the land of this case in the shape of "A". At the time of the construction of the above road, the above road is connected to the main part of "A". At the time of the construction of the above road, a waterworks and sewerage facility was installed with the upper part of 02 Dong-11 large 462 square meters, and at the above Jeju-si 2 Dong, 02 Dong ○○-11 large 462 square meters, the plaintiff newly built the plaintiff's apartment house and resided in the residential area.

(5) After the sale of the instant land, the Plaintiff paid KRW 152,930,00 to Kim○-ju with the brokerage commission, and the said brokerage commission includes the amount of KRW 39,315,910,00, which is spent for the division of the instant land and the construction cost for road (entry roads) and for the road (entry roads).

[Reasons for Recognition] Facts without a partial dispute, Gap evidence 3 through 19 (including each number), Eul evidence 22-1 through 14, Eul evidence 2, 4, Eul evidence 5-1 through 4, Eul evidence 7-1, 2, and Eul evidence 7-2, and the purport of the whole testimony and arguments of the court below's witness ○○, and Go-style.

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

살피건대, 원고가 이 사건 토지를 약 30년 가량 보유하여 왔으며 이 사건 양도행위 전후로 다른 부동산 거래행위를 한 사실이 없고, 또한 2001년 내지 2002년경에는 감귤 가격 폭락으로 과수원 운영에 많은 어려움이 있었을 뿐만 아니라 정책적으로도 감귤과수원 폐원사업이 추진되었던 점 등에 비추어 상당한 규모 및 가액의 이 사건 토지를 매수할 사람을 찾기가 어려웠을 것으로 보여 매도를 위하여 불가피하게 이 사건 토지를 분할하였다는 원고의 주장을 전혀 이해하지 못할 바는 아니지만, 한편 앞서 인정한 사실에 의하여 알 수 있는 다음과 같은 사정, 즉 ① 원고가 특별히 이 사건 토지를 바른 시일 내에 매도하여야만 할 급박한 사정이 있었다는 등의 정황이 이 사건 변론과정에 드러나 있지 아니한 점, ② 그럼에도 불구하고 원고는 부동산 중개업자인 김○주와 이 사건 위임약정을 체결하였는데, 그 약정에 의하면 김○주는 이 사건 토지의 매도가액 합계액이 20억원을 초과할 경우 그 초과부분에 해당하는 금액을 1억 5천만원 한도내에서 중개수수료로 지급받을 수 있도록 되어 있어, 원고로서는 부동산 중개업자인 김○주에게 많은 수수료를 유인책으로 제시하여 이 사건 토지를 20억원 이상에 매각함으로써 높은 수익을 얻기 위하여 김○주로부터 부동산 중개 용역을 제공받은 것으로 보이는 점, ③ 원고가 김ㅍ주에게 지급한 중개수수료 152,930,000원 중 토지 분할과 진입로 확ㆍ포장 및 상ㆍ하수도 공사비 등으로 소요된 금원인 39,315,910원을 제외하면 김○주가 실제로 취득한 중개수수료는 113,614,090원(= 152,930,000원 - 39,315,910원)이라 할 것인데, 원고가 이처럼 거액의 중개수수료를 지급한 이유는 김○주로 인하여 상당한 수익을 얻었기 때문인 것으로 보이고 달리 다른 이유를 찾기 어려운 점, ④ 더구나 이 사건 토지는 김○주에 의하여 생활정보지에 전원주택지로 광고가 게재되었는데, 이에 대하여 원고는 당시 그러한 사정을 알지 못하였다고 주장하나, 원고로부터 이 사건 토지의 매각에 관한 권한을 위임받은 부동산 중개업자 김○주로서는 거액의 중개수수료를 취득하기 위하여 최대의 노력을 기울이는 과정에서 위 광고게재를 한 것이고 원고로서도 이러한 중개업자의 노력을 끌어내기 위하여 앞서 본 바와 같은 중개수수료 약정을 하였던 것으로 보이므로 위 광고게재가 반드시 원고의 의사에 반하는 것이었다고 단정하기 어려운 점, ⑤ 새로 설치된 진입로 및 상ㆍ하수도가 원고나 고○식의 편의를 위하여 개설된 측면도 있어 보이나, 한편 위 진입로 및 상ㆍ하수도는 이 사건 토지의 중심 부분을 관통하고 있어 이로써 이후 다른 이 사건 토지의 매수자들도 매수토지를 위 진입로 및 상ㆍ하수도에 연결하여 사용할 수 있는 여지를 가지게 되었고 당초 이 사건 양도행위 당시에도 매수자들은 이러한 점을 고려하여 이를 계약서에 명기하였던 것으로 보이는 점, ⑥ 이 사건 토지의 분할이 지목 변경 없이 이루어지기는 하였으나, 일부 매수인의 경우에는 토지의 지목 변경이 잔금지급의 조건이었고 실제로 지목 변경도 이루어졌으며, 일반적으로 전원주택 부지는 그 특성상 매수인이 토지를 매수한 후 즉시 그 지상에 주택을 신축하지 않고 상당기간 보유하다가 매수인 개인의 사정에 따라 주택신축이 필요한 시점에 토지의 지목 변경 및 건축허가를 마치고 주택을 신축하는 경우가 많아(이 사건 토지의 상당부분은 누군가에 의하여 과수원으로 경작되고 있는 것으로 보이지 아니하고 오히려 방치되어 있는 상태로 보인다) 원고가 직접 토지의 지목 변경에 관여하지 아니하였다거나 현재 분할 매각된 토지들의 대부분이 지목 변경이 이루어지지 않고 있다는 점이 원고 주장을 뒷받침할 근거가 되기 어려운 점, ⑦ 이 사건 토지의 규모가 크고 매도가액 및 매매횟수가 적지 아니하며 토지의 분할과 진입로 확ㆍ포장 및 상ㆍ하수도의 설치에 사용한 비용만도 39,315,910원에 이르는 점 등을 종합적으로 고려하여 보면, 원고의 이 사건 양도행위는 수익을 목적으로 한 계속성과 반복성이 있는 사업 활동의 영위로 보기에 충분하고 그로 인한 소득은 사업소득에 해당한다 할 것이므로 결국 이 사건 과세처분은 적법하다(피고의 이 사건 과세처분이 재산권에 대한 지나친 규제로 여겨질 수도 있으나, 이는 원고로 하여금 분할매도 자체 또는 그로 인한 수익 취득을 금지하는 것이 아니고 단지 이 사건 양도행위가 부동산매매업에 해당할 경우 사업자로서 원고가 얻은 수익에 대하여 세금을 부과하는 것일 뿐이다).

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is unfair with different conclusions, so it is revoked by the defendant's appeal and dismissed the plaintiff's claim. It is so decided as per Disposition.

[ Jeju District Court Decision 2007Guhap294, Oct. 09, 2008]

1. The Defendant’s imposition of global income tax of KRW 133,098,210 on April 5, 2006 against the Plaintiff on April 5, 2006 and the imposition of global income tax of KRW 14,08,530 on global income for the year 2004 is 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 October 17, 1973, the Plaintiff purchased and owned ○○○○○ ○2-dong 1305-3 orchard 8,731 square meters (hereinafter “instant land”) and divided the instant land into 15 parcels around July 7, 2003, and transferred 13 parcels of the said divided land from August 2003 to January 2004 (hereinafter “instant transfer”), and reported and paid the transfer income tax to the Defendant.

B. However, on April 5, 2006, the Defendant imposed upon the Plaintiff global income tax of KRW 133,098,210, and global income tax of KRW 14,088,530 for the year 2004 (hereinafter “instant taxation disposition”) on the ground that the instant transfer act constitutes real estate sales business, and thus, income therefrom constituted business income rather than business income.

C. On May 25, 2006, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service, but the Commissioner of the National Tax Service dismissed the request on January 10, 2007.

[Ground of Recognition] Unsatisfy, Gap evidence 1 to 2, and Eul evidence 1 (including each number)

2. Summary of the parties’ assertion

A. The plaintiff

Although the Plaintiff continued to operate a wrusium for about 30 years since the acquisition of the instant land, since around 199, when the wrusal wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrusc wrus, the instant land was sold in one parcel, which is inevitable for the purchaser to appear as a lot due

B. Defendant

1) This title, where the Plaintiff developed and sold the land by dividing the instant land into 15 lots through a real estate broker and installing a road not superior to the purpose of orchard and a water supply and sewerage facility, etc., this title is included in the real estate sale business as part of the development activities of the land under the General Rule 19-7(1)3 and (4) of the Income Tax Act (see the relevant Acts and subordinate statutes, e.g., attached Table 1.). Therefore, the tax disposition of this case

3. Grounds for judgments; and

(a) Relevant statutes;

Attached Form 1.

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

As seen earlier, the Defendant cited the above general provisions as the main basis of the taxation disposition of this case (the determination of the Commissioner of the National Tax Service may be deemed to be the main basis of the above provision). In other words, the Plaintiff’s act constitutes “development activities of land” as stipulated by the above general provisions, and thereby, it should be evaluated as “operation of real estate sales business” as stipulated by the Income Tax Act. This evaluation seems to have been based on the premise that the above general provisions per se have independent normative power as an order of laws and regulations. However, the Defendant’s above understanding of the above general provisions is not based on (i) in terms of delegation system, but rather on delegation of Article 19 of the Income Tax Act and its Enforcement Decree; and (ii) in terms of the contents of the above general provisions, it is difficult to accept in that the development activities of the land of this case can not be seen as always establishing the relationship of “business of real estate sales,” and thus, it does not mean that the above general provisions have an independent authority to interpret or enforce the provisions of Article 19 of the Income Tax Act.

C. The instant decision: The meaning of Article 19 of the Income Tax Act and Article 34 of the Enforcement Decree of the Income Tax Act

Ultimately, the determination on the legitimacy of the instant taxation depends on whether it conforms to the above Act and the Enforcement Decree thereof. However, 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 that sell and sell the land of farm, housing site, etc. and the buildings, etc. constructed by giving a contract to others for the land of a farm, housing site, etc., which have been

Ultimately, the issue of whether the transaction of real estate constitutes real estate trading, which is a taxation requirement for business income, or is subject to transfer income tax, shall be determined according to the ordinary social norms, considering the acquisition and holding of real estate, whether the transfer is made, whether the transfer is made for profit, the scale and frequency of the transfer, the other party, etc., as well as the continuity and repetition of the degree that can be seen as a business activity. In making the judgment, not only about the relevant transferred real estate, but also about the entire real estate owned by the transferor, and all the circumstances surrounding the transfer during the period before and after the time when the transfer took place (see, e.g., Supreme Court Decisions 2004Du3700, Jun. 24, 2004; 2004Du5412, Apr. 24, 2001). In short, the issue of legitimacy of the taxation disposition in this case can be considered as the core business judgment in light of the above legal principles.

4. Determination

(a) Facts of recognition;

(1) Around October 17, 1973, the Plaintiff purchased the instant land and operated the instant land as a walsium directly or through a high ○○, Gangwon, etc. However, since around 1999, the walsium price salsium with a walsium decline and the walsium policy became difficult to operate the orchard, such as the implementation of walsium and the walsium policy, etc. Around 2001, the Plaintiff laid down the instant land as a walsium around that time.

(2) However, as the instant land was not sold for about one year, around June 2, 2003, the Plaintiff entered into a delegation agreement with the representative of ○○○ Licensed Real Estate Agents on the instant real estate disposition (hereinafter “instant delegation agreement”) and its main contents are as follows. Accordingly, the entire transfer of the instant land was carried out by Kim○○ upon being entrusted by Kim○○, and during which the advertisement was made to sell the instant land as the house site in daily information.

① The Plaintiff delegates his/her authority to sell the instant land to Kim○○ by dividing it into an adequate size, and Kim○ shall secure at least two billion won with the purchase price of the instant land, and where the purchase price is at least two billion won, the Plaintiff shall pay the excess amount to Kim○○ by up to 150 million won with the highest remuneration and other expenses. However, where the excess amount exceeds 150 million won, the Plaintiff shall be dealt with through consultation between the parties.

② All expenses incurred in the sale of the instant land and the expenses incurred in the division and access road packaging, waterworks and sewerage construction, etc. shall be borne by Kim○-○.

(3) Thereafter, around July 7, 2003, the Plaintiff divided the instant land into 15 lots as shown in the annexed Table 2, and sold 13 lots of land from August 2003 to January 2004 in total 1.85,444,00 won.

(4) Meanwhile, among the instant partitioned land, the Plaintiff donated the instant divided land to ○○○○ ○2 Dong 1305-18-18 766 square meters to ○○○○○○○. The said road extended and packaged access roads used as the existing farm road of the instant land. At the time of expanding and packing the said access roads, the Plaintiff installed a water supply and drainage facility with a size of 1305-11 462 square meters on the underground of the said road at the time of expanding and packing the access roads. At ○○○○2 Dong 1305-11 462 square meters, the Plaintiff was currently residing in ○○○○ 2 Dong 1305-11 462 square meters.

(5) The official land value prior to the division of the instant land (based on January 1, 2003) is KRW 187,000 per square meter. The Plaintiff’s wife located adjacent to the instant land was expropriated as a public site, and the amount of KRW 488,475,00 (per 292.500 per square meter) was paid as compensation around June 23, 2005, when the Plaintiff’s wife located adjacent to the instant land was expropriated as a public site.

[Ground of recognition] The statements and images of Gap evidence 3 through 19, Eul evidence 22, Eul evidence 2, Eul evidence 7 (including each number), and the purpose of the whole testimony and arguments of the witness ○○ and Go○○○

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

(2) In light of the above legal principles, the Plaintiff had been holding approximately 30 years of land, and there was no other real estate transaction before and after the transfer of the instant land. ② The total purchase price of the instant land was KRW 1,854,40,00 (excluding KRW 273,00 per 0,00), which was difficult to find for the Plaintiff to purchase and sell the instant land by taking into account the following circumstances: (a) it was difficult to find out that there was a low-scale increase in the land price of the instant land for the purpose of the sale of the instant land by taking into account the fact that the Plaintiff’s construction of 00 square meters of land was carried out for the purpose of the sale of the instant land at 00 square meters of land; and (b) it was difficult to find that there was a low-scale increase in the land price of the instant land for the purpose of the sale of the instant land at 200,000 won, which was located in 02,500,000 won of the instant land.

Ultimately, the instant taxation disposition that the Plaintiff imposed on the Plaintiff on the ground that the Plaintiff’s income derived from the instant transfer constituted business income under the Income Tax Act cannot be deemed unlawful.

5. Conclusion

Therefore, the plaintiff's claim seeking the revocation of the taxation disposition of this case is reasonable and it is so decided as per Disposition by the assent of all participating Justices.