Whether a taxpayer may seek gains on transfer based on the actual transaction price on the ground that the relevant transaction is an speculative transaction, after a taxpayer becomes unable to claim the actual transaction price because he/she fails to submit evidential documents verifying the actual transaction price within the deadline (negative)

If a taxpayer fails to meet the requirements of Article 170 (4) 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14083, Dec. 31, 1993); thus, if a taxpayer is already unable to claim the actual transaction price pursuant to the provisions of Article 170 (4) 3 of the former Enforcement Decree of the Income Tax Act, he cannot claim the calculation of gains on transfer based on the actual transaction price on the ground that the transaction falls under the type of transaction under Article 170 (4) 2 of the former Enforcement Decree of the Income Tax Act, and the transaction is not considered differently

Articles 23(4) and 45(1) of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993; see Article 96 of the current Income Tax Act); Article 170(4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14083 of Dec. 31, 1993; see Article 166(4) of the current Income Tax Act)

Supreme Court Decision 92Nu7290 delivered on December 24, 1992 (Gong1993Sang, 646) Supreme Court Decision 93Nu852 delivered on July 16, 1993 (Gong1993Ha, 2325) Supreme Court Decision 93Nu15090 Delivered on January 28, 1994 (Gong194Sang, 857)

Sic Doctrine

Head of Ansan Tax Office

Seoul High Court Decision 94Gu38221 delivered on November 21, 1995

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court.

We examine the grounds of appeal.

Articles 23(4) and 45(1)1 of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993); Article 170(4)3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 14083 of Dec. 31, 1993; hereinafter the same) declares that in case where assets are transferred, in principle, the standard market price should be converted from the previous actual market price in calculating transfer margin. Thus, in case where assets are transferred, if evidential documents confirming the actual market price under the above Enforcement Decree are not submitted within the deadline, the transfer margin should be calculated based on the standard market price even if the actual market price is confirmed, and if the actual transaction price is not based on the actual market price (see, e.g., Supreme Court Decisions 96Nu4022, Dec. 10, 1996); Article 170(4)2 of the Enforcement Decree of the same Act provides that the above actual market price is no more than the actual market price.

The court below held that the transfer margin should be calculated by applying the actual transaction value to the transfer of the land of this case, as it is reasonable from the viewpoint of the principle of no taxation without law or the equity between the taxpayer and the tax authority, even if the transferor fails to meet the requirements set forth in subparagraph 3 of the above subparagraph, in the case of the transaction set forth in subparagraph 2 (c) of the above subparagraph, since the transfer of the land of this case constitutes the transaction set forth in subparagraph 2 (c) of the above subparagraph within one year from the date of its acquisition, and it constitutes the transaction set forth in subparagraph 3 of the above subparagraph. However, the court below erred by misapprehending the legal principles as to the calculation of transfer margin under the Income Tax Act, which affected the conclusion of the judgment.

Therefore, the part of the judgment below against the defendant is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Final Young-young (Presiding Justice)