Whether foreign debt evaluation gains are included in the total amount of income of real estate rental business;

Profits from the evaluation of foreign currency assets (or redemption profits) and valuation losses (or redemption losses) shall be included in real estate rental business's total revenue or necessary expenses, and the provisions of the relevant Income Tax Act do not exceed the limit of delegated legislation, nor violate the substance over form principle

Article 4 (Classification of Income)

Article 18 (Real Estate Rental Income)

1. The plaintiff's claim is dismissed.

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

The imposition of global income tax of KRW 93,702,860 on the Plaintiff on July 1, 2007 shall be revoked.

1. Details of the disposition;

A. On March 3, 2005, the Plaintiff obtained a loan of 315 million U.N. (hereinafter referred to as “foreign currency debt of this case”) from ○ bank, acquiring real estate in Gangnam-gu Seoul Metropolitan Government ○○○-dong 000-00 (hereinafter referred to as “the real estate of this case”), and runs the real estate lease business using the above real estate from April 4, 2005.

B. The Plaintiff calculated the real estate rental income and paid the comprehensive income tax for the year 2005, without including the amount of the won currency account of the foreign currency debt of this case and the amount of the won currency amount assessed by the exchange rate as of the end of 2005, which is 235,397,220 won (the UN exchange rate at the time of the loan was 938,23 won per 100N, but the exchange rate at the time of December 31, 2005 was 860.04 won per 10N, hereinafter referred to as the “evaluation marginal profit of this case”).

C. On July 1, 2007, the Defendant imposed global income tax of KRW 93,702,860 on the Plaintiff for the reason that the evaluation marginal profit of this case should also be included in the total amount of income on real estate rental income (hereinafter “instant disposition”).

D. On September 28, 2007, the Plaintiff appealed and requested an inquiry to the National Tax Tribunal on September 28, 2007, but was dismissed on November 27, 2007.

[Ground of recognition] Facts without dispute, Gap 1-3 evidence, Eul 1-5 evidence, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Article 97(1) of the Enforcement Decree of the Income Tax Act (hereinafter referred to as “instant provision”) is null and void in excess of the limit of delegated legislation.

(2) Under the principle of no taxation without law, the redemption profit and evaluation profit of foreign currency debt does not fall under the category and scope of real estate rental income under the Income Tax Act.

(3) The instant disposition is a taxation on unrealized profits, which violates the substance over form principle, and is contrary to the principle of equality in comparison with the acquisition of non-business real estate by borrowing foreign currency.

(b) the relevant regulations;

Article 4 (Classification of Income)

Article 18 (Real Estate Rental Income)

Article 24 (Calculation of Gross Income Amount)

Article 27 (Calculation of Necessary Expenses)

Article 39 (Accretion Year, etc. of Gross Income and Necessary Expenses)

Article 55 (Tax Rates)

Article 28 (Scope of Real Estate Rental Income)

Article 97 (Evaluation of Asset or Debt in Foreign Currency)

C. Determination

(1) Whether the instant provision exceeded the bounds of the delegation law

In the case of delegated legislation, its limit is predictability. This means that the basic matters of the contents and scope that are already provided for by Presidential Decree in the Act are specifically defined, and any person can predict the outlines of the contents that shall be provided for by Presidential Decree, etc. from the relevant Act. The existence of such predictability is not determined with only one of the relevant specific provisions, but shall be determined with organic and systematic integration of the relevant provisions. If it is reasonably possible to predict the outlines of the relevant provisions in light of the nature of each relevant Act by comprehensively examining the specific and individual nature of each relevant Act, it does not deviate from the limitation of delegation (see Supreme Court Decision 2007Du9884, Oct. 26, 2007).

Article 39 (4) of the Income Tax Act provides that "the type and scope of the total amount of income shall be prescribed by Presidential Decree," and Article 39 (4) of the same Act does not explicitly stipulate the type and scope of the total amount of income, i.e., the amount to be included in the total amount of income," but Article 24 of the same Act and Article 39 of the Income Tax Act provides that "the necessary matters concerning the scope of the amount received or to be received in the calculation of the total amount of income shall be prescribed by Presidential Decree" and Article 39 (3) of the same Act provides that "the necessary matters concerning the scope of the total amount of income and necessary expenses shall be prior to the acquisition and evaluation of assets and liabilities in the calculation of the amount of income in the taxable period, along with the year to which the total amount of income and necessary expenses belong, and matters necessary for the evaluation of assets and liabilities shall be easily predicted to be prescribed by Presidential Decree in an organic and systematic interpretation. Thus, the provision of this case shall not be deemed to include necessary matters concerning the scope and calculation of the amount of income in foreign currency assets and liabilities, and liabilities in the year concerned.

(2) Whether the evaluation marginal profit of this case constitutes the type and scope of real estate rental income

According to Article 18 (2) of the Income Tax Act, real estate rental income shall be the amount calculated by deducting necessary expenses from the total amount of income in the current year. As seen earlier, the provision of this case in force as it does not deviate from the limit of delegated legislation, provides that the amount of won currency account of foreign currency assets and liabilities and the difference between the won currency amount assessed by exchange rate as of the end of the current year shall be included in the necessary expenses or total amount of income in the current year. Thus, this case’s evaluation profit shall be included in the total amount of real estate rental income. The Income Tax Act regulates items and tax rates of taxes in Articles 4, 18, and 55 of the Income Tax Act, and only delegates only the scope of the total amount of income and the method of evaluating assets for such purpose to Presidential Decree, and thus it shall not be deemed a violation of the principle of substantial taxation and the principle of equality. (3) The inclusion

Whether capital gains, which are subject to taxation, should be limited to realizing the scope of income, or include unrealized gains, are merely the issues of this law and policy based on the purpose of taxation, characteristics of taxable income, and problems of taxation techniques (see Supreme Court Decision 92Nu18122, Nov. 10, 1995). Thus, it cannot be deemed that this does not violate the principle of substantial taxation solely on the ground that this unrealized gains, which are unrealized gains, are included in the total amount of income. Moreover, since real estate and non-business real estate, such as real estate used for real estate rental business, residential housing, and housing for residence, which are used for real estate rental business, are different in terms of the purpose of use, type of

3. Conclusion

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