Suwon District Court 2010Guhap12201 (Law No. 1107.07)

National Tax Service Review and Transfer 2009-0262 (20106.01)

It is illegal that the value of land and buildings is unclear, and it is divided in proportion to the appraisal value ratio.

Since the value of land, buildings, facilities, equipment, etc. at the time of the exchange contract is clearly divided and transferred, it cannot be deemed as a case where the distinction between the value of land, buildings, etc. is unclear, and the appraisal for the loan purpose is not likely to be excessively assessed for that purpose. In light of the above, it cannot be readily concluded that the appraisal value was objectively assessed at the time of

Article 100 of the Income Tax Act

2011Nu28174 Revocation of Disposition of Imposing capital gains tax

- Appellants

XX

Head of Suwon Tax Office

Suwon District Court Decision 2010Guhap12201 Decided July 7, 2011

January 18, 2012

March 21, 2012

1.The judgment of the first instance shall be modified as follows:

A. The part of the Defendant’s disposition imposing capital gains tax of KRW 000 for the year 2005 imposed on the Plaintiff on August 1, 2009 exceeds KRW 000 shall be revoked.

B. The plaintiff's remaining claims are dismissed.

2. 15% of the total litigation costs shall be borne by the Plaintiff, and the remainder by the Defendant.

1. Purport of claim

The Defendant’s disposition of imposition of capital gains tax of KRW 000 for the year 2005 against the Plaintiff on August 1, 2009 shall be revoked.

2. Purport of appeal

A. Plaintiff: The part against the Plaintiff in the judgment of the first instance is revoked, and the Defendant’s imposition disposition of capital gains tax belonging to the year 2005, which belonged to the Plaintiff on August 1, 2009, revoked KRW 000.

B. Defendant: The part against the Defendant among the judgment of the first instance court is revoked, and the Defendant’s claim as to the portion exceeding KRW 000 of the disposition imposing capital gains tax belonging to the year 2005, which belonged to the Plaintiff on August 1, 2009, is dismissed.

1. The part citing the judgment of the court of first instance

Of the reasoning of the judgment of this court, the facts of recognition 1. and 2. Whether the disposition is legitimate or not. The plaintiff's assertion is made. Since the relevant Act and subordinate statutes (from the second fourth to the third below of the judgment of the court of first instance) are the same as the corresponding part of the judgment of the court of first instance, it shall be accepted in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420

2. Determination

A. Whether the calculation of transfer value of the pertinent building is illegal

1) The Defendant denied the Plaintiff’s report of capital gains tax for the year 2005 on the key building, and calculated capital gains tax on the key building on the premise that the transfer of real estate issues, including the key building, together with the land and the building, pursuant to Article 100(2) of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same) constitutes “the case where the distinction between the value of the land and the building is unclear”.

2) First, the issue of real estate, including the key building, falls under the case where the distinction between the value of land and building, etc. is unclear” under Article 100(2) of the former Income Tax Act. Article 100(2) of the former Income Tax Act provides that where the transfer value is calculated based on the actual transaction price pursuant to paragraph (1) and where the land and building, etc. are acquired or transferred together, it shall be divided and entered, and where the distinction between the value of the land and the building, etc. is unclear, it shall be calculated based on the standard market price at the time of acquisition or transfer as prescribed by the Presidential Decree. Article 166(4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same) delegated by him shall be calculated in accordance with the proviso of Article 48-2(4) of the Enforcement Decree of the Value-Added Tax Act.

In light of the above laws and regulations, the case where only the real price of the pertinent real estate is traded with other real estate without dividing it into the actual price of the pertinent real estate, can be seen as the case where the distinction between the value of the pertinent land and that of the building is unclear (see, e.g., Supreme Court Decision 91Nu768, Apr. 24, 1992). It does not constitute the case where the sale of the pertinent land by distinguishing the value of the pertinent land and the building from that of the said 19-19-4 and 22-A-2, the testimony of the first instance court witness Lee Jae-B, and the overall purport of the pleading of this court witness's testimony that the Plaintiff changed the value of the pertinent land to 0-A-200 won by changing the price of the pertinent land to 00-A-200 won by changing the price of the pertinent land which was owned by this case to 00-A-200 won by exchanging the issues of the building and its equipment.

Therefore, since the Plaintiff clearly divided the land at the time of the instant exchange contract into KRW 000, the key building into KRW 000, KRW 000, and KRW 000, the transfer of real estate, including the key building does not constitute a case in which the distinction between the value of the land, building, etc. is unclear. Of the instant disposition, the part concerning the key building in this case is unlawful without having to examine the remaining arguments [it is deemed that the Plaintiff reported the transfer income tax pursuant to Article 100(2) of the former Income Tax Act and Article 166(4) of the former Enforcement Decree of the Income Tax Act, and thus, the instant disposition was made by applying the proviso of Article 114(4) of the former Income Tax Act, but the transfer of the key real estate, etc. cannot be deemed as a case in which Article 100(2) of the former Income Tax Act applies, which is an exception to the standard market price principle, and thus, the transfer of the building constitutes a case in which the transferor reported the actual transaction price at the time of transfer and acquisition to the head.

4) Accordingly, the Defendant asserts to the effect that the value of the instant exchange contract for the instant land and the instant building at the time of transfer, in light of the book value and D Appraisal Corporation’s appraisal value on December 17, 2004, it cannot be acknowledged as it was set without any objective grounds. However, the aforementioned assertion is clearly contrary to Article 100(2) of the former Income Tax Act and Article 166(4) of the former Enforcement Decree of the Income Tax Act, and thus, cannot be accepted. In addition, in light of the following circumstances, the calculation of the value of the instant land and the instant building at the time of the instant exchange contract cannot be deemed significantly unreasonable in light of transaction practices.

① The Plaintiff: (a) constructed the key building on the pertinent land, which is a private house or facility; (b) but (c) as the business became well aware of by virtue of the influence that the building was newly generated in the vicinity; and (d) transferred the key building through the instant exchange contract to thisA. During the said transfer process, the Plaintiff alleged that the first floor of the key building was defective in the building; and (b) the Plaintiff and thisA determined the value of the key building at KRW 00 (A’s evidence No. 20, 21, testimony of witnesses of the first instance trial, testimony of witnesses of this court, testimony of witnesses of the witnessB of this court).

② ThisA, upon the transfer of the pertinent building, was well aware of friendship and business, and was unable to repay the Plaintiff’s debt to the Plaintiff, and the Plaintiff’s real estate issues, including the building at issue on August 28, 2006 upon the compulsory auction filed on April 11, 2005, including the building at issue, was awarded a successful bid to a third party (the testimony of the witness of the first instance court of the first instance and the first instance court of the evidence No. 2-1, 2, 8-1 and 3 of the evidence No. 8-1). From the building at issue used as a private letter or facility, it was well known that there was a defect in the building, and in light of the circumstances of the auction thereafter, it is highly likely that the real estate issues would not have high the value excluding the land at issue.

③ Since appraisal conducted by a DD appraisal corporation as claimed by the Defendant is for the purpose of lending key buildings, etc., there is little possibility of excessive appraisal for that purpose, and real estate (including real estate) including real estate was knocked at KRW 000 on August 2006 (the above amount is not much different from the value of the building on the issue under the exchange contract of this case). Accordingly, HH insurance corporation, which borrowed KRW 000 as security, was paid only KRW 00 (Evidence 8-3, No. 3, and the purport of the entire pleadings) by DD appraisal corporation, which received only KRW 00 as dividends (Evidence 8-3, No. 3, and No. 3). It is difficult to conclude that appraisal conducted by DD appraisal corporation had objectively assessed the value of the building on the issue at the time of the exchange contract of this case.

5) In addition, the Defendant asserts to the effect that the transfer price difference in the building at issue is higher than the amount of the instant disposition in the case of calculating the transfer price in the standard market price not the actual transaction price. However, at the time of the instant disposition, the Defendant confirmed the acquisition price of the building at issue as the actual transaction price, and the transfer price as seen earlier is also confirmed as the actual transaction price (Evidence No. 22, No. 3) and the transfer price difference in the building at issue should be calculated as the

B. Whether the calculation of the transfer value of such land is unlawful

As seen earlier, on October 14, 2005, the Plaintiff received 000 won a down payment from KimCC, and KimCC transferred 000 won for the first-class collateral obligation + 000 won for the second-class collateral obligation, a collateral security right holder, and H Insurance Co., Ltd. on condition that he takes over 00 won for the second-class collateral security obligation (Evidence No. 6, B, and 7), and thereafter, KimCC subrogated 00 won for the H Insurance Co., Ltd. on December 4, 2006 under the above contract, and the second-class collateral security right was cancelled on December 4, 2006. Accordingly, the Plaintiff’s assertion on this part is without merit.

(c) Justifiable tax amount;

Of the instant disposition, the part on the building at issue is unlawful, and the part on the land at issue is legitimate. If a legitimate tax amount is calculated among the instant disposition, it is 000 won, such as the statement on the calculation of capital gains tax on the attached Table 205.

3. Conclusion

Of the instant dispositions, the parts within the legitimate scope of tax are lawful, and the parts exceeding the legitimate tax amount should be revoked in an unlawful manner. The judgment of the first instance court is partly different from this conclusion, and it is modified as indicated in the Disposition.