It is legitimate to calculate the acquisition value at the conversion price because it is difficult to recognize it as payment in kind.

In full view of the facts and circumstances, since it is insufficient to recognize the fact that the acquisition value of the instant land is the value due to the payment in kind, it is reasonable to calculate the acquisition value at the conversion price by deeming that the Defendant cannot verify the acquisition

Article 97 (Calculation of Necessary Expenses in Transfer Income)

2018Gudan69052 Revocation of Disposition of Imposing capital gains tax

KoreaA

BB Director of the Tax Office

May 29, 2019

July 10, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 00,000,00 (including additional tax. There is no special reference to additional tax) for the transfer income tax for the year 2016, which reverts to the Plaintiff on October 10, 2017 (including additional tax. There is no special reference to additional tax. However, the disposition of imposition of additional tax is separate from the disposition of imposition of principal tax, and it is apparent that the Plaintiff included the amount stated in the purport of the claim. As

1. Details of the disposition;

1. Details of the disposition;

A. On April 12, 2004, the Plaintiff acquired the land of this case, including 3,785 square meters and 2,284 square meters and 00-0 square meters and 3,785 square meters and 00,000 square meters and 2,284 square meters and 200-0 square meters and 3,785 square meters and 200-0 square meters (hereinafter referred to as "the land in this case"; each land is specified as its parcel number) from thisCC (hereinafter referred to as "the first transferor").

B. After the Plaintiff transferred the instant land on November 7, 2016 (hereinafter “instant transfer”), on December 31, 2016, the Plaintiff calculated the transfer value as indicated in the details of the Plaintiff’s report on capital gains tax as KRW 450,184,00, and paid KRW 00,000 for the instant transfer to the Defendant on December 31, 2016.

C. On October 10, 2017, the Defendant deemed that the acquisition price of KRW 385,00,000,000 reported by the Plaintiff cannot be recognized as the actual transaction price at the time of the acquisition of the instant land, and calculated capital gains by using the acquisition price as KRW 60,122,173, the conversion price, and then notified the Plaintiff of an increase in capital gains tax of KRW 000,000 (including additional tax) for the year 2016. After reflecting the Plaintiff’s golf membership transfer loss on October 20, 2017, the Defendant issued a disposition to reduce capital gains tax of KRW 00,000 for the year 200,000 (including additional tax) by reflecting the Plaintiff’s golf membership transfer loss on October 10, 2017 (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed a request for examination with the Commissioner of the National Tax Service on February 6, 2018, but the Commissioner of the National Tax Service dismissed the Plaintiff’s request on May 21, 2018.

Each entry of Gap evidence Nos. 1, 6, 7, and Eul evidence Nos. 1 and 2 (including each number; hereinafter the same shall apply) based on recognition, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff acquired the instant land from the first transferor under the pretext of payment in substitutes of KRW 385,00,000 on credit sales claims held by the Plaintiff. Nevertheless, it is unlawful to recognize the original obligation performed by the Defendant as the actual transaction price at the time of payment in substitutes, and to determine the acquisition price at the conversion price. Meanwhile, the details of payment in substitution are as follows.

1) On March 20, 1996, the Plaintiff started to operate a synthetic fibres wholesale business with the trade name called “AA company”, and established ○○ Textiles Co., Ltd. on August 6, 2013, and has been engaged in textile wholesale business until now.

2) South A and its first transferor (hereinafter referred to as "the first transferor, etc.") operated a chemical textile fiber wholesaler from September 22, 1997 to June 1, 2009 with the trade name "B Commercial Act". The first transferor, etc. was in a transaction relationship with the Plaintiff by purchasing the Korea Welfare Foundation from the Plaintiff and selling it to the customer.

3) While the first transferor, etc. had paid the transaction amount from time to time according to the business situation while engaging in the credit transaction between the Plaintiff and the Korea Welfare Foundation, the first transferor, etc. entered into an agreement with the Plaintiff on April 2004 that the credit transaction amount to the Plaintiff was KRW 385,00,000, due to the business depression of the “B Commercial Act” and that the first transferor and the Plaintiff would pay the above credit transaction amount to the Plaintiff.

4) On April 12, 2004, the Plaintiff completed the registration of ownership transfer of the instant land pursuant to the above accord and satisfaction agreement. The Plaintiff completed the registration of ownership transfer in the future. In the process, the grounds for registration was sold in the form of sale for convenience in the

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) In calculating gains on transfer, the actual transaction value, which serves as the basis for the calculation of gains on transfer, refers to not a general market price that reflects the objective exchange value, but an actual amount agreed for payment itself or at the time of transaction (see, e.g., Supreme Court Decision 2011Du24286, Oct. 15, 2015). In addition, where the transfer of assets is made by accord and satisfaction, the original amount of debt constitutes the actual acquisition value of the relevant assets (see, e.g., Supreme Court Decision 97Nu19809, Mar. 10, 198). In such a case, the burden of proving the existence and amount of debt that is the actual transaction value, and accordingly, payment in substitutes, ought to be deemed to be borne by the tax authority to bear the burden of proof as a matter of principle, on the grounds that the tax authority bears the burden of proving necessary expenses that constitute the basis for the determination of taxable income. However, deduction of necessary expenses is not only for the taxpayer, but most within the control area of necessary expenses.

2) In full view of the evidence Nos. 2 through 6, No. 3, and the testimony (part) by the witness BB, the following facts or circumstances may be acknowledged.

① At around 1997, South AA opened and operated a textile wholesaler under the name of the StateB, an employee, with the trade name of “BB commercial,” and closed down around 2009. The first transferor is an infant of South AA.

② South AA traded with the Plaintiff by purchasing the Korea Welfare Foundation on credit from the Plaintiff, selling it to its customers, and settling the price to the Plaintiff.

③ On September 17, 1999, the first transferor completed the registration of establishment of a mortgage on the share owned by the first transferor, the maximum debt amount of KRW 100 million, the initial transferor, and the Plaintiff, with respect to the share owned by ○○○○-dong, ○○○-dong, ○○○○-dong, 2-5 forest land 19,724 square meters. On December 30, 2000, the first transferor completed the registration of establishment of a mortgage on the instant land.

④ On April 9, 2004, a sales contract was prepared between the Plaintiff and the first transferor on the instant land at KRW 385,000,000.

3) On the other hand, on the other hand, the following facts or circumstances are also recognized if there is no dispute, and if the purport of the entire pleading is added to each entry in the evidence Nos. 4 through 8.

① In light of the circumstances in which the right to collateral security was established in the instant land, etc., both South A and the Plaintiff were in a transactional relationship, it is recognized that the Plaintiff had the credit transaction amount to be paid by South and North A.

② Furthermore, it is difficult to believe that the Plaintiff’s remaining credit transaction amount has reached KRW 385 million at the time of acquiring the instant land, in light of the following: (a) the stateB’s statement appears consistent with this; (b) the stateB made a statement that it did not take charge of accounting or tax-related affairs; (c) it was her own data or that her her friened, rather than performing her duties; and (d) it is a statement that 15 years have elapsed from the time of 2004 and is inconsistent with objective circumstances recognized below; and (b) there is no other objective evidence to acknowledge the obligation amount of the credit transaction amount claimed by the Plaintiff.

③ The real estate sales contract (No. 3) signed between the Plaintiff and the first transferor on April 9, 2004 entered into between the Plaintiff and the first transferor on April 9, 2004 entered the sales price in KRW 385 million, but the said sales contract was not prepared by the Plaintiff on the first transferor, but was formulated retroactively thereafter.

④ Rather, barring any special circumstance, the seal of approval issued by the parties to a transaction is presumed to have been prepared in accordance with the sales contract between the parties (see Supreme Court Decision 93Nu2353, Apr. 9, 1993). A real estate sales contract was prepared on September 4, 2004 that the Plaintiff purchased the instant land from the first transferor for KRW 22 million, and the Plaintiff and the first transferor obtained the seal of approval from the head of ○○○○ on April 12, 2004 as above. In addition, the Plaintiff submitted the said seal of approval, and the Plaintiff paid the acquisition tax and registration tax as tax base for the sales amount of KRW 22 million as stated in the seal of approval.

⑤ On April 12, 2004, the first transferor calculated the transfer value of the instant land in total as KRW 21,762,890, an individual publication, and reported and paid the transfer income tax for the year 2004.

(6) As of 2004, the standard market price at the time of the instant land is KRW 21,762,890 in total, and even if the actual sale price is set higher than the officially announced price, it is difficult to understand that the sale price was set at KRW 385,00,000 in total, which is about 17 times higher than the above standard market price at the time.

4) In light of the facts and circumstances described in the above 3) above, the fact or circumstances recognized in the above 2) alone are insufficient to recognize the fact that the acquisition value of the instant land was 385,000,000, and there is no other evidence to acknowledge it. Therefore, it cannot be deemed that the Defendant erred in calculating the acquisition value at the conversion price by deeming that the actual acquisition value of the instant land cannot be verified by documentary evidence, such as a sales contract, and thus, it cannot be deemed that the instant disposition is lawful.

3. Conclusion

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