Cho Jae-chul2010-Gu2673 ( October 26, 2011)

Income earned by an individual by selling listed stocks shall be deemed capital gains other than business income.

Since private investors can easily sell shares continuously and repeatedly through computer programs, it is difficult to recognize the feasibility of stock trade only with continuity and reflectivity, and it appears to be an activity to obtain simple profit margins rather than an activity to expand, develop or grow as a stock dealer. Therefore, it constitutes capital gains other than business income.

Article 94 of the Income Tax Act

Article 157 of the Enforcement Decree of Income Tax Act

2011Guhap1353 Revocation of Disposition of Imposing capital gains tax

p. Mex

Head of Seogu Tax Office and one other

February 1, 2012

March 7, 2012

1. All of the plaintiff's claims are dismissed.

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

The disposition of imposition of capital gains tax of KRW 13,11,810,151, which was vested in the Plaintiff on February 12, 2011 by the head of the Dong Daegu Tax Office and the disposition of imposition of capital gains tax of KRW 1,915,894,051, which was vested in the Plaintiff on September 27, 2011 by the head of Seogu Tax Office, shall be revoked.

1. Details of the disposition;

A. As of December 31, 2005, the Plaintiff purchased shares from around December 31, 2005, and (i) as of December 31, 2005, the owned value of the XX stock company, O, △△△ stock company (hereinafter respectively, referred to as " XX"), exceeding 10 billion won each, and falls under 10 billion won from January 1, 2006 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter referred to as the "former Income Tax Act"), Article 94 (1) 3 of the former Income Tax Act, Article 157 (4) 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20720, Feb. 29, 2008; hereinafter referred to as "former Enforcement Decree of the Income Tax Act"), and (ii) △△ stock company became a major shareholder of 400 billion won as of March 31, 2006.

B. The Defendants imposed capital gains tax on the Plaintiff in 2006 and 2007 as follows.

C. (1) On July 21, 2010, the Plaintiff filed a request with the Tax Tribunal for an imposition of capital gains tax for the year 2006 (tax amount 1,08,962,285 won) from April 26, 2010 among the determined amount of tax imposed on the said paragraph (b) above, but dismissed on April 26, 201. (2) On May 4, 2011, the details of imposition under the said paragraph (b) above, which were generated from the stock-listed corporation’s capital gains tax for increase or decrease (tax amount 1,789,064, 161 won) of the capital gains tax for the said corporation’s stocks (tax amount 1,000,000 won) and (5) the total amount of tax imposed on the stock-listed corporation’s capital gains tax for the said corporation’s capital gains tax for 200 million won or more, and (2) the transfer income tax amount for the pertinent stock-listed corporation’s capital gains tax for 200 billion won or more.

According to Article 19 (1) 10 of the former Income Tax Act and Article 29 of the former Enforcement Decree of the Income Tax Act, the scope of business which is the source of business income shall be based on the Korean Standard Industrial Classification except as otherwise provided for in the former Enforcement Decree of the Income Tax Act, and according to the Korean Standard Industrial Classification (amended by Presidential Decree No. 2007-53 of Feb. 1, 2008, hereinafter referred to as the "former Korean Standard Industrial Classification"), the "industrial activities that are invested in financial assets with funds (personal assets, bonds, bills, debts, etc.) other than the issuance of securities and trust funds shall be classified as "other invested institutions (65939)," and the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007, hereinafter referred to as the "former Securities and Exchange Act").

B. Whether the income from the purchase and sale of shares is capital gains depends on whether the purchase and sale of shares constitutes a business under the former Income Tax Act. Whether the business falls under the category of business under the former Income Tax Act shall not entirely depend on whether the purchase and sale of shares externally professed for the stock trading business, such as obtaining permission from the Financial Supervisory Commission or completing business registration under the former Securities and Exchange Act, but shall be determined in light of social norms by considering all circumstances such as the profitability, continuity, repetition, length of the transaction period, and the difference of transaction amount (see, e.g., Supreme Court Decisions 87Nu784, Dec. 22, 1987; 86Nu96, May 26, 1987).

In full view of the overall purport of the arguments in Gap evidence Nos. 1, 1, 6-1 through 7-6, 10-1, 10-1, and 13, the plaintiff shall make a decision based on professional knowledge, such as collecting information, analyzing items, and selection of items. The plaintiff shall make a purchase and sale of shares with his own share investment, and he shall distribute profits and losses arising from the investment of shares to 5:5. The plaintiff shall be deemed to have purchased and sold shares of approximately 19,60 billion won from around 206 to around 2009 through about 19, 600, and after considering the following facts, the plaintiff's purchase and sale of shares constitutes a transfer income tax under the former Korean Standard Industrial Classification (Korea Standard Industrial Classification). The plaintiff's transfer income tax cannot be deemed to be subject to transfer income tax, and the plaintiff's transfer of shares cannot be deemed to be subject to transfer income tax (the plaintiff's transfer income tax).

(2) A person who is eligible to engage in the securities trading business under the former Securities and Exchange Act shall be a stock company with the permission of the Financial Supervisory Commission. However, since the Plaintiff was not a stock company and did not register the business for the securities trading business, it shall not be distinguished from ordinary investors.

(3) Since an individual investor is able to engage in another business as well as make a continuous and repeated transaction of stocks through a computer program, it is difficult to recognize the continuity and repetition of the transaction of stocks as business feasibility.

(4) According to the agreement between the Plaintiff and the DamageA, the Plaintiff raised funds and traded shares using a bona fide stock investment account in accordance with the intent of the DamageA. Such a transaction method is the same as that of an individual investor to sell shares using a securities investment advisory company.

(5) Ordinary business income is generated by combining assets and labor, while capital gains are generated by increasing the value of assets for a certain period of time. Since the Plaintiff’s labor has contributed to stock trading, it constitutes a case where the Plaintiff’s income increases its value by holding stocks.

(6) The Plaintiff’s stock trade appears to be an activity aimed at obtaining simple profit margins rather than seeking expansion, development, or sustainable growth as a stock dealer.

5. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.