The adequacy at the time of calculating the acquisition value as evaluation amount at the donation;

The provisions of the Enforcement Decree of the Income Tax Act that calculates the acquisition value at the time of transferring donated articles are legitimate and delegated by the same act.

Article 97 (Calculation of Necessary Expenses)

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 50,539,270 on May 15, 2006 against the Plaintiff was revoked.

1. Details of the disposition;

A. On February 20, 1989, the Plaintiff acquired and held ○○○○○○ apartment, ○○○○ apartment, ○○○○○ apartment, ○○○○, ○○ apartment, ○○○, ○○○, ○○○, ○○○, ○○○, ○○○, ○○○, ○○, ○○, ○○, ○, ○○, ○○, ○, ○, ○, ○, ○, ○, ○, ○, ○, ○, ○, and ○, ○, ○, ○, ○, and ○, ○, ○, ○, ○, and ○, ○, ○, ○, and

B. On June 9, 2003, the Plaintiff transferred the instant house, and on August 31, 2003, the transfer value was KRW 124,726,980, and the acquisition value was KRW 123,417,494.

C. The Defendant sent to the Plaintiff a notice of revised declaration demanding the Plaintiff to report the transfer price based on the actual transaction price on the ground that the Plaintiff is a three-household owner. Accordingly, on May 31, 2004, the Plaintiff reported the revised declaration with the transfer price of KRW 285,00,000, the actual transaction price of KRW 282,00,000, and the acquisition price of KRW 282,07,836, the value converted by the standard market price at the time of acquisition.

D. However, on May 15, 2006, the Defendant did not recognize the Plaintiff’s revised return, and the transfer value is KRW 285,00,000, which is the actual transaction value, and the acquisition value is KRW 123,417,494, which is the supplementary appraised value pursuant to the provisions of Article 61 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7335, Jan. 14, 2005; hereinafter the same) calculated gains on transfer. The Defendant issued the instant disposition of imposing capital gains tax of KRW 50,539,270, which reverts to the Plaintiff in 2003.

E. The Plaintiff, who was dissatisfied with the instant disposition, filed an appeal on July 28, 2006, but was dismissed on June 29, 2007.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

① Even though the Plaintiff did not pay gains from the transfer of the instant house, the Defendant imposes capital gains tax on the premise that there is a large amount of gains from the transfer; ② the Plaintiff does not engage in a transaction for the purpose of speculation; ② the Plaintiff does not recognize exceptions under the tax law even though a three-unit owner was inevitable due to workplace circumstances or inheritance; ③ the inheritance tax is based on the market price standard and is thus unfair to recognize the acquisition value of the standard market price at the time of transfer for the Plaintiff’s failure to report the market price due to lack of tax base; ④ The acquisition value is applied to the standard market price in violation of the general principle of taxation of capital gains tax; and the transfer value is illegal to impose capital gains tax by applying the actual transaction price.

B. Relevant statutes

former Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003)

Article 89 (hereinafter referred to as “transfer income tax”) shall not be levied on the following incomes:

3. Income accruing from transfer of such one house for one household as prescribed by the Presidential Decree (excluding expensive houses whose prices exceed the standard prescribed by the Presidential Decree) and the appurtenant land within the area calculated by multiplying the area of the land on which the building is built by the ratio as determined by region under the Presidential Decree (hereafter in this Article, referred to as the “land annexed to the house”);

Article 94 Scope of Transfer Income

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

Article 96 (Transfer Value)

(1) The transfer value of assets referred to in Article 94 (1) 1 and 2 shall be the standard market value at the time of transfer of the assets concerned: Provided, That where the assets concerned fall under any of the following subparagraphs, the actual transaction value between the transferor and transferee (hereinafter referred to as “actual transaction value”) shall apply:

7. Other cases prescribed by Presidential Decree in consideration of types, holding period, holding number, scale of transaction, transaction methods, etc. of the relevant assets.

Article 97 (Calculation of Necessary Expenses for Capital Gains)

(1) In calculating gains on transfer of a resident, necessary expenses to be deducted from the transfer value shall be as follows:

1. Acquisition value:

(a) In case of assets as prescribed in Article 94 (1) 1 and 2, the standard market price at the time the assets are acquired: Provided, That in case where the assets concerned fall under any of subparagraphs of Article 96 (1), it shall be based on the actual transaction price required for the acquisition of such assets;

(b) In cases of assets falling under Article 94 (1) 3 and 4, the actual transaction price required for the acquisition of the relevant assets;

(c) In the case of proviso (a) or (b), where it is impossible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value

(5) Matters necessary for calculation of necessary expenses, such as the scope of actual transaction price required for acquisition and gift tax amount shall be prescribed by Presidential Decree.

Enforcement Decree of the former Income Tax Act (amended by Presidential Decree No. 18173 of Dec. 30, 2003)

§ 155. Special case of “one house for one household”

(1) Where one household which has one house in Korea comes to possess two houses temporarily by acquiring another house (including the case where it acquires by constructing by itself) before transferring the relevant house, if it transfers the previous house within one year (including the case where unable to transfer within one year, and which falls under the causes as determined by the Ordinance of the Ministry of Finance and Economy) from the date of acquiring another house, it shall be regarded as one house for one household, and the provisions of Article 154 (1) shall be applicable. In this case, where a part of previous house and appurtenant land is purchased by consultation or expropriated under Article 154 (1) 2 (a), and where the relevant remaining house and appurtenant land are transferred within two years from the date of such transfer or expropriation, the transfer of relevant remaining house and appurtenant land shall be deemed to be included in the transfer or expropriation of the previous house and appurtenant

Article 162-2 Transfer Price

(5) The term "cases prescribed by Presidential Decree" in Article 96 (1) 7 of the Act means cases where one household possessing three or more houses transfers the house (including land annexed thereto).

§ 163. Necessary expenses of transferred assets

(9) In the application of the provisions of Article 97 (1) 1 (a) (proviso) and (b) of the Act to the assets inherited or donated, the value assessed under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or of donation shall be considered as the actual transaction value at the time of its acquisition: Provided, That in the case of the land inherited or donated before a publicly announced individual land price on August 30, 1990 under the Act on the Publication of Land Prices and the Evaluation of Land, etc., the larger amount shall be the value assessed under the provisions of Articles 60 through 66 of

former Inheritance Tax and Gift Tax Act (amended by Act No. 7335 of January 14, 2005)

Article 60. Principles, etc. of Appraisal

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (2))

(2) The market price under paragraph (1) shall be the price which is considered to be normal in the case of free trade between many and unspecified persons, and shall include the price of expropriation, public auction, appraisal price, etc. which is recognized as the market price under conditions

(3) In applying paragraph (1), where it is difficult to compute the market price, the price assessed by the methods prescribed in Articles 61 through 65 shall be based on the types, scale, transaction conditions, etc. of the relevant property.

(4) In applying paragraph (1), the value of the donated property added to the value of the inherited property pursuant to Article 13 shall be based on the market price as of the date of donation.

Article 61 Appraisal of Real Estate, etc.

(1) Real estate shall be appraised by the following methods:

1. Land:

The individual officially assessed land price under the Public Notice of Values and Appraisal of Lands, etc. Act (hereinafter referred to as the “individual assessed land price”): Provided, That the value of the land for which no officially assessed individual land price exists, shall be the amount assessed by the superintendent of the competent tax office by a method as determined by the Presidential Decree, taking into consideration the officially assessed individual land price

2. Buildings:

The value calculated and publicly announced by the Commissioner of the National Tax Service at least once a year in consideration of the new construction price, structure, use, location, year of new construction, etc.

C. Determination

(1) As to the assertion of illegality regarding the calculation of capital gains

According to Articles 94(1), 96(1)7, and 97(1)1(a)1(c) of the former Income Tax Act (amended by Act No. 7006, Dec. 30, 2003; hereinafter the same shall apply), and Article 162-2(5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003; hereinafter the same shall apply), where one household possessing three or more houses transfers the house, the transfer value and acquisition value of the asset shall be calculated on the basis of the actual transaction value. In this case, where it is impossible to verify the actual transaction value at the time of acquisition, the amount calculated by applying the transaction example, appraisal value or conversion value as prescribed by Presidential Decree, and Article 97(5) of the former Income Tax Act provides for necessary matters concerning the calculation of the amount equivalent to the actual transaction value at the time of acquisition, and Article 163(1) through (6) of the former Enforcement Decree of the Income Tax Act provides for the value of inheritance tax or donation.

Based on the above provisions, the Defendant calculated gains from the transfer of the instant house based on the transfer value of KRW 285,00,00,000, when calculating gains from the transfer of the instant house, there is no error in the calculation method of gains from transfer in the amount of gains from transfer calculated by deducting KRW 123,417,494, which is the acquisition value assessed by supplementary evaluation methods under Article 61 of the former Inheritance Tax and Gift Tax Act, and KRW 3,702,524, which is the necessary expenses, and in calculating gains from transfer, the value corresponding to the tax base of inheritance tax or gift tax (value appraised under Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencement of inheritance or donation) shall be deemed as necessary expenses in the calculation of gains from transfer, and only when the transfer value exceeds the above value may prevent tax evasion or double taxation. In light of the above, it cannot be deemed that the provisions of the Income Tax Act, which make the calculation of gains from transfer by such methods, are invalid in violation of the no taxation without law or equity

(2) As to the allegation of illegality relating to the requirements for three housing holders per household

Although Article 89 subparag. 3 of the former Income Tax Act provides for non-taxation on one house for one household, as well as Article 155(1) of the former Enforcement Decree of the Income Tax Act provides for a way to dispose of the previous house within one year and to maintain the non-taxation benefits for one household, the Plaintiff continues to hold the house without disposing of the house within the prescribed period under the above Enforcement Decree, as long as the Plaintiff becomes a three-household owner of the instant house, which would be taxed on the basis of the actual transaction price as to the difference in the transfer of the instant house, it does not seem to be null and void against tax equity, on the contrary to the Plaintiff’s objective purpose of acquiring the instant house as long as the Plaintiff became a three-household owner of the instant house.

Therefore, the disposition of this case in this case is legitimate and open to any one.

3. Conclusion

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