Early High Court Decision 2010J0879 ( October 25, 2010)

Any disposition that is imposed by excluding the reduction or exemption of capital gains tax due to farmland substitute land because it has not been cultivated directly for not less than three years is legitimate.

In full view of the fact that not only had been staying in Japan for a considerable period from the time of acquisition to the time of transfer of farmland, but also has been staying in Japan most of the annual years after the acquisition of the substitute farmland, and the fact that it was confirmed that a certificate of cultivation was prepared by mistake, etc., the capital gains

2010Guhap1581 Revocation of Disposition of Imposing capital gains tax

○ Kim

○ Head of tax office

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 capital gains tax against the Plaintiff on March 5, 2010 is revoked.

1. Details of the disposition;

A. On March 3, 2004, the Plaintiff acquired 1/2 shares in 003 ○○-dong 1003 Do 1003 Do 1,395 m2 (hereinafter “the instant farmland”). On February 15, 2008, the Plaintiff transferred the instant farmland to the Korea Land Corporation on February 15, 2008, and on February 4, 2009, acquired 95 m2 (hereinafter “the instant substitute farmland”).

B. On June 1, 2009, the Plaintiff filed a final return on capital gains tax with the Defendant, on the ground that the capital gains amount of the farmland in this case was derived from substitute land for farmland, and accordingly, applied for reduction or exemption of capital gains tax under Article 70 of the former Restriction of Special Taxation Act (amended by Act No. 9921, Jan. 1, 2010; hereinafter the same), but the Defendant issued a disposition imposing capital gains tax of KRW 52,423,630 on the Plaintiff on December 11, 2009, on the ground that the Plaintiff did not directly cultivate the farmland in this case for three or more years retroactively from the date of transfer of the farmland in this case, on the ground that the reduction or exemption provisions for farmland in this case

C. Accordingly, on February 10, 2010, the Plaintiff filed an objection against the Defendant. On February 17, 2010, the Defendant revised the acquisition value of the farmland of this case on February 17, 2010, and the Plaintiff voluntarily corrected capital gains tax of KRW 15,714,840 in the disposition imposing capital gains tax, and the Plaintiff voluntarily withdrawn the objection on February 18, 2010. On March 5, 2010, the Defendant notified the Plaintiff of the re-determination of capital gains tax of KRW 36.708.790 (hereinafter “instant disposition”).

D. Accordingly, the Plaintiff filed an appeal with the Tax Tribunal on March 18, 2010, but the Tax Tribunal dismissed the Plaintiff’s appeal on May 25, 2010.

[Reasons for Recognition] Facts without dispute, Gap evidence 2, 3, Eul evidence 1, 2, 4 through 6 (including virtual numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff mainly cultivated a ship in the farmland of this case. The plaintiff was only a single car for a short time, and the plaintiff was trying to use a ship ship by shipping the ship ship to the market, not to compensate for money. Thus, the plaintiff did not spread agricultural chemicals, etc. on the ship ship, so the plaintiff did not have little expenses and losses to cultivate a ship ship in the farmland of this case. The area cultivated by the plaintiff was small to the extent of 210 square meters and it does not need to possess a farming machine and it is difficult for the plaintiff to directly operate a ship on the land of this case for more than three years. Thus, the disposition of this case on the other premise is unlawful, since the income from the transfer of the farmland of this case was reduced or exempted from capital gains tax due to a large farmland of Article 70 of the former Restriction of Special Taxation Act, and the disposition of this case was made on the other premise.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

(1) According to Article 70(1) of the former Restriction of Special Taxation Act and Article 67(1), (2), and (3)1 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 20620, Feb. 22, 2008) (amended by Presidential Decree No. 20620, Feb. 22, 2008), where a person who resided in the previous location of farmland for not less than three years and cultivated while residing in the new location of farmland for not less than three years after acquiring another farmland within one year from the date of transfer, and the newly acquired farmland for not less than three years, and where the area of the farmland to be acquired is 1/2 of the area of the farmland to be transferred or the value of which is not less than 1/3 of the value of

(2) The purport of the provision that reduces capital gains tax on substitute land for farmland under the former Restriction of Special Taxation Act is to protect a self-employed farmer and encourage agriculture by guaranteeing free substitution of farmland. Thus, the object of reduction or exemption is limited to a case where farmland acquired by a self-employed farmer is to be substituted for cultivation necessity. Thus, the requirements for reduction or exemption of capital gains tax on substitute land for farmland should be farmland. ① The requirements for reduction or exemption of capital gains tax on substitute land for farmland shall be farmland, ② the previous land and new land shall be farmland shall be farmland, ② the previous land shall be cultivated directly while residing in the previous location for three or more years, and the new land shall be cultivated directly for three or more years, ③ the period between the transfer date of the previous land and the acquisition date of the newly acquired land shall be within one year, and ④ the period between the transfer date of the previous land and the newly acquired land shall be not less than 1/2 of the value of the farmland to be transferred. In this case, the "direct cultivation" shall be proved to be 1/3 or more of capital gains tax on the said farmland regularly owned or its own necessity.

(3) With respect to the instant case, there is insufficient evidence to acknowledge the fact that the Plaintiff directly cultivated while residing in the location of the instant farmland for more than three years, and there is no other evidence to acknowledge that the testimony by the public witness B, as to the health team, Gap evidence Nos. 4, 5, Eul evidence No. 8, and Eul evidence No. 10. Rather, according to the evidence Nos. 7 and 8, the Plaintiff was staying in Japan on 262, 2005, 211, 2006, 307, 309, and 34, 2008, as well as from the time of the acquisition of the instant farmland to the time of the transfer, the Plaintiff prepared a certificate of the fact that the Plaintiff had cultivated the farmland for more than three years, and it is only recognized that the Plaintiff prepared a certificate of the fact that the Plaintiff had cultivated the farmland for more than three years after the acquisition.

(4) Therefore, the Plaintiff’s assertion is without merit and the instant disposition is lawful, since it did not meet the requirements for application of the capital gains tax reduction and exemption under the former Restriction of Special Taxation Act.

3. Conclusion

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