In cases where a reconstruction and redevelopment partner who falls under one house for one household acquires a new house based on an existing house and an association member's relocation right acquired by providing and acquiring land, the method of calculating the retention period for applying the special long-term holding deduction / Where the total floor area of the commercial building is larger than the total floor area of the house or new house is acquired based on the association member's relocation right acquired by providing the same combined house, whether the commercial building part of the previous concurrently-used house and the new house part can be considered as

In light of the contents of Article 94(1)1, Article 95(2) and the main text of Article 95(4) of the former Income Tax Act (amended by Act No. 11146, Jan. 1, 2012; hereinafter “former Income Tax Act”), Article 159-2, Article 154(8)1, the proviso of Article 154(3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010; hereinafter “former Enforcement Decree of the Income Tax Act”) and the purport of separately setting a longer long-term possession special deduction rate for one house for one household, the retention period for applying the special deduction shall be calculated by adding up only the period of possession of the assets prescribed in Article 94(1)1, and Article 95(2) and (4) of the former Income Tax Act to the existing house and the newly acquired association member’s relocation right for the same purpose as the previous one for two separate possession period.

Articles 94(1)1 and 95(2) and (4) of the former Income Tax Act (Amended by Act No. 11146, Jan. 1, 2012); Articles 154(3) and (8)1, and 159-2 of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 22580, Dec. 30, 2010);

[Plaintiff-Appellant] Plaintiff 2006Du16854 decided Jun. 14, 2007 (Gong2007Ha, 1102)

Plaintiff (Attorney Kim Young-chul et al., Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

Seoul High Court Decision 2012Nu15168 decided November 14, 2012

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 94(1)1 of the former Income Tax Act (amended by Act No. 11146, Jan. 1, 2012; hereinafter “Income Tax Act”) provides for “income accruing from the transfer of land or a building” as one of the capital gains subject to taxation. Article 95(2) of the same Act provides for the special long-term holding deduction amount to be deducted from gains from transfer, and the main text of Article 95(2) provides for “the special holding deduction amount to be granted from the gains from transfer of the asset under Article 94(1)1 of the Income Tax Act for the assets the holding period of which is three years or longer, the amount calculated by multiplying the gains from transfer of the asset by the deduction rate by holding period of 1/100 (from 10/100 to 30/100 according to the holding period).” Article 95(2) provides that “The holding period shall be the amount calculated by multiplying the gains from transfer of the asset by 2/100 to 80/10 according to the holding period.”

In addition, Article 159-2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010; hereinafter “Enforcement Decree of the Income Tax Act”) provides that “one house for one household prescribed by Presidential Decree” in the proviso of Article 95(2) of the Act with the exception of Table â……” means a house (including a house deemed one house for one household under Articles 155, 155-2, 156-2, and other provisions) where one household owns one house in the Republic of Korea as of the date of transfer, and Article 154(8)1 of the Enforcement Decree of the Income Tax Act provides that “in calculating the residence period or retention period of one house for one household, it shall be aggregated the residence period and retention period of the destroyed house and reconstructed house in the period of residence or possession.” Meanwhile, the proviso of Article 154(3) of the Enforcement Decree of the Income Tax Act provides that “where the total floor area of the destroyed house is less than the total floor area of the house.”

In light of the contents of the above provisions and the purport of separately setting a higher ratio of the special long-term holding deduction rate for one house for one household, the period of holding to apply the special long-term holding deduction should be aggregated only for the period of holding the assets prescribed in Article 94 (1) 1 of the Income Tax Act, so in cases where the period of holding has been destroyed or lost or changes in the period of using another deduction rate as an asset to be applied, it shall not be added to the period of holding. Provided, That in cases where a member of reconstruction and redevelopment association provides an existing house and acquires a new house on the basis of an association member's relocation right acquired an existing house and an association member's relocation right under Article 159-2 of the Enforcement Decree of the Income Tax Act, the special long-term holding deduction rate prescribed in Article 95 (2) of the Income Tax Act should be applied by adding up the period of holding the existing house and the association member's relocation right to the existing house and the newly acquired association member's relocation right to the previous house, and thus, the new special deduction for one house and the newly acquired one house shall be applied.

2. According to the reasoning of the first instance judgment as cited by the lower court, the Plaintiff acquired a house for the previous concurrent use (365.89 square meters in the upper price, 85.79 square meters in the common use area, 51.74 square meters in the aggregate, 503.42 square meters in the aggregate) which was acquired before January 1, 1985, to a maintenance and improvement project association that implements a housing redevelopment project under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, and held an association member's relocation right related thereto, and on March 24, 2005, the Plaintiff acquired the instant house in Yongsan-gu, Yongsan-gu, Seoul (243.85 square meters in the exclusive use area, hereinafter "the instant house") by 00 square meters in accordance with the approval of the management and disposal plan on March 24, 2005, and the Plaintiff transferred the instant house to a third party on March 8, 2010.

Examining these facts in light of the legal principles as seen earlier, the portion corresponding to the portion of the previous combined house among the instant houses shall be deemed one house for one household, and the combined holding period of the previous combined house shall be applied to the long-term possession special deduction rate of one house for one household as stipulated in Article 95(2) of the Income Tax Act by aggregating the portion of the previous combined house and the holding period. The portion corresponding to the portion of the previous combined house among the instant houses shall be calculated separately from the portion of the previous combined house, and the amount corresponding to the portion corresponding to the previous portion of the commercial house shall be separately applied under Article 95(2) of the Income Tax Act by calculating the holding period respectively.

Nevertheless, the court below determined otherwise that Article 95 (2) of the Income Tax Act shall apply to the portion of the previous multiple-use houses to 30% of the special long-term possession deduction rate (10 years or more) stipulated in the Table 1 ‘The Table', and that the portion of the previous multiple-use houses among the houses in this case shall be held for not less than 10 years from the acquisition date of the previous multiple-use houses from the acquisition date of the previous multiple-use houses to the transfer date of the house in this case, and that Article 95 (2) of the Income Tax Act shall apply the special long-term possession deduction rate of 80% (holding for not less than 10 years) stipulated in the Table 2 ‘the Table 2 ‘The decision of the court below is erroneous in the misapprehension of legal principles as to the method of calculating the period of possession for applying the special long

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min Il-young (Presiding Justice)