early 2015 Middle 3906 ( October 20, 2015)

Acquisition of simple exchange without market price appraisal and difference settlement shall be subject to conversion acquisition value.

Where the conversion acquisition value is acquired through a simple exchange without undergoing a settlement procedure for the difference between the market price appraisal of the object of exchange and the appraisal value, the application of conversion acquisition value is legitimate.

Article 97 (Calculation of Necessary Expenses of Capital Gains)

2016Gudan50157 Revocation of Disposition of Imposing capital gains tax

EO

O Head of tax office

April 18, 2017

July 11, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s imposition of capital gains tax of KRW 72,925,830 (including additional tax) for the year 2013 on December 1, 2014, and the imposition of capital gains tax of KRW 13,116,720 (including additional tax) for the Plaintiff on March 16, 2015, respectively, shall be revoked.

1. Details of the disposition;

A. On September 20, 200, the Plaintiff: (a) on April 14, 2001, an OO 35-3 Forest land of 35-3 forest land of 9,000 square meters (hereinafter “the land before the instant subdivision”); (b) on April 14, 2001, the Plaintiff filed a report of 37-3 forest land of 35-3 forest of ri, 962 square meters; (c) on April 37-3 forest of risan City of 37-5 forest of risan City of 856 square meters; (d) 37-5 forest of risi, 37-6 forest of risi, 37-7 forest of 470 square meters; and (e) on August 22, 2013, divided it into 35-3, 37-3, 37-7, 37-7 forest land of 300 square meters; and (e) transferred the transfer value to the Defendant.

B. On December 1, 2014, the Defendant denied the acquisition value reported by the Plaintiff and notified the Plaintiff of KRW 72,925,830 of the transfer income tax for the year 2013, based on the result of the local correction audit by the director of the regional tax office that deemed that the actual acquisition value of the instant land was unclear.

C. On October 20, 2015, the Plaintiff filed an appeal with the Tax Tribunal on the said disposition, but the Tax Tribunal dismissed the said appeal.

D. Meanwhile, the Defendant found any error in calculating the conversion acquisition value of the instant land, and notified the Plaintiff of KRW 13,116,720 of the transfer income tax for the year 2013, on March 16, 2015, by applying the conversion acquisition value as KRW 84,496,023 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 5, Eul evidence Nos. 1 through 7 (including branch numbers in the case of additional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The assertion that the actual acquisition value is 270,000,000 won

On August 18, 2000, the Plaintiff entered into an exchange contract by evaluating the sale price of the instant land owned by the Plaintiff as KRW 350,000,000, and 270,000,000,000, under the premise that the actual acquisition price of the instant land can not be seen as KRW 270,00,00,00,00, in spite of the actual acquisition price of the instant land owned by the Plaintiff as KRW 468-3 O apartment complex, 101, 103, 104, and 105 (owner listed on the registry; hereinafter referred to as “O apartment complex”). The instant disposition is unlawful, provided that the conversion price cannot be confirmed on the premise that the actual acquisition price of the instant land could not be seen as KRW 270,00,00,00.

2) Claim that necessary expenses should be deducted from 130,000,000 won

The Plaintiff paid KRW 130,00,000 for the construction of facilities permitted to change the form and quality of the instant land in consultation with the KOO, and for the installation of civil engineering works, etc., but the instant disposition that was not recognized as necessary is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Determination as to the assertion that the real acquisition value is KRW 270,000,00

The actual transfer value of the relevant asset, which serves as the basis for calculating the amount of capital gains tax, refers to the value that the transferor transfers the asset at the time of the transaction and received as the price for the transfer and is objectively recognized by the sales contract or other documentary evidence. Thus, in the case of the exchange of the transaction, where the transaction is conducted a value exchange based on the objective value of the object by following the procedure for settling the difference in the appraisal value, etc., the actual transfer value may be verified, but if the transaction is conducted simply by the method of determining only the difference in the value of the object to be exchanged by the agreement between the parties without the above process and paying the difference, the actual transfer value shall not be confirmed. The same applies to the case where the parties to the exchange contract arbitrarily evaluate the value of the object to be exchanged and then calculate the difference (see, e.g., Supreme Court Decision 2010Du27592, Feb. 9,

In light of the above legal principles, the following circumstances can be acknowledged by comprehensively assessing the purport of the entire argument in the present case, namely, (1) as long as the market price was assessed on the land before subdivision and the O apartment market at the time of entering into an exchange contract with the Plaintiff at the time of entering into the exchange contract with the Plaintiff, the appraisal of the difference in the appraisal price cannot be seen as going through the procedure for settling the difference in the appraisal price; (2) The Plaintiff’s purchase price of the land before subdivision was 270,000,000, and the O apartment market price was 350,000,000,000, after consulting the sale price of the land before subdivision with the Plaintiff at the time of entering into the exchange contract with the Plaintiff, the actual acquisition price of the land in this case is 270,00,000,000,000 won in each real estate register. However, the Plaintiff’s purchase price of the land in this case cannot be confirmed as the actual transaction price of the land in this case.

2) Determination on the assertion that necessary expenses should be deducted from 130,000,000 won

Article 97 (2) 2 of the Income Tax Act provides that the acquisition value shall be based on the "amount calculated by adding the amount prescribed by the Presidential Decree to assets by the acquisition value," not on the actual transaction example, appraisal value, conversion value, or standard market value, which is not on the actual transaction value, and only the so-called "amount deducted from the necessary expenses" may be deducted from the "amount calculated by adding the amount determined by the Presidential Decree to the assets by the acquisition value. However, in cases where the acquisition value is based on the conversion value pursuant to the proviso of the same subparagraph, if the former amount is less than the latter amount, the "total amount of the conversion value and the amount determined by the Presidential Decree" and the "capital expenditure and transfer expenses, etc.", the latter amount may be deemed necessary expenses. Meanwhile, since the tax authority bears the burden of proving the legality of taxation, the tax authority bears the burden of proving necessary expenses, in principle, as well as the deduction of necessary expenses, but most of the facts that form the basis of necessary expenses, are within the control area of the taxpayer, so the tax authority is difficult to prove the taxpayer in consideration of difficulty or equity between the parties (see, 2012.

In light of the above legal principles, it is insufficient to recognize that the sum of the conversion value and estimated deduction amount of the instant disposition is KRW 85,143,197 (the conversion value + KRW 647,174), and that the evidence submitted by the Plaintiff alone either paid KRW 130,00,000 due to the change of the form and quality of the land or paid KRW 85,143,197 (the sum of capital expenditure and estimated deduction amount) more than the aggregate of the conversion value and estimated deduction amount. In light of all the circumstances, such as the lack of evidence to acknowledge it differently, the instant disposition is legitimate to apply the conversion value and estimated deduction amount to KRW 85,143,197 (the sum of estimated deduction amount + KRW 647,174). This part of the Plaintiff’s assertion on the other premise is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed, and it is so decided as per Disposition.