National Tax Service Review Income 2011-0106 ( October 24, 2011)

It should be regarded as a honorarium for solving legal disputes early and for resolving existing legal relations.

Since the amount that the plaintiff received from the non-party is paid as a case of early settlement of legal disputes and determination of the existing legal relationship, the tax assessment of global income tax is legitimate because it constitutes a "compensation" under the Income Tax Act.

2011Guhap14006 Global income and revocation of disposition

XX

Head of Suwon Tax Office

July 6, 2012

August 10, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of global income tax of KRW 000 on August 8, 2011 against the Plaintiff on August 8, 201 shall be revoked.

1. Details of the disposition;

A. The Plaintiff’s income generated and the process of the relevant lawsuit

(1) The Seoul Jongno-gu Seoul Metropolitan Government 00-00 square meters, 18.3 square meters, 00-00 square meters, 10.9 square meters, and 10.4 square meters, including 00-00 square meters (hereinafter collectively referred to as “the instant real property”) were owned by the Plaintiff’s father, who was the Plaintiff’s father. The leB died on March 3, 1946, and the leB solely succeeded to the said real property, and the said leB died on October 25, 2006, and jointly succeeded to the said real property by the Plaintiff, etc. as his child.

(2) On March 8, 2006, Nonparty 2 filed a lawsuit (Seoul Central District Court 2006Da104332) with respect to the execution of the procedure for the registration of ownership transfer (Seoul Central District Court 2006Gadan10432) by asserting that the instant real estate, which had been registered in the name of Yoon on March 8, 2006, was occupied by the intention of ownership for at least 20 years and acquired by prescription, with respect to the said real estate. The above court tried by public notice on July 27, 2006 on the ground that the whereabouts of Yoon was unknown, and sentenced to the judgment accepting the claim of the Nonparty against Yoon on July 20, 2006 (hereinafter “the instant judgment”). The above judgment became final and conclusive on August 20, 206.

(3) 소외인들은 이 사건 판결에 기하여 2006. 11. 6. 이 사건 부동산에 관한 소유권이전등기를 마친 후, 2007. 5. 22. 소외 XX갤러리 주식회사(이하 '소외 회사'라고 한다)에 부동산을 매도하고 2007. 6. 29. 소외 회사 앞으로 그 소유권이전등기를 마쳐 주었다.

(4) On June 4, 2009, the Plaintiff filed a subsequent appeal (Seoul Central District Court 2009Na23671) against the judgment of this case on June 4, 2009, alleging that “The Nonparty did not have occupied the instant real estate, and even if not, the Nonparty’s possession of the said real estate constitutes a possession without intention to own it as an illegal possession, and thus, the Nonparty cannot be deemed to have acquired the said real estate by prescription.”

(5) However, during the proceeding of a lawsuit, an agreement was concluded between the Plaintiff and the Nonparty that the Nonparty would pay KRW 000 to the Plaintiff when the Plaintiff withdraws the said subsequent appeal (hereinafter referred to as “instant agreement”). According to the said agreement, the Plaintiff voluntarily withdrawn the said subsequent appeal on October 8, 2009. The Nonparty paid KRW 000 to the Plaintiff on the same day, and the Nonparty, at the Plaintiff’s request, remitted KRW 00 to the Park J-J, which represented the Plaintiff in the said lawsuit, and directly remitted the remainder to the Plaintiff.

B. The details of imposition and correction of global income tax on the Plaintiff

(1) On August 8, 2011, the Defendant deemed the Plaintiff’s above KRW 000,000, which was received from the Nonparty, as “compensation for other income under Article 21(1)17 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same)” and imposed and notified the Plaintiff of KRW 00,000,000,000 for global income tax for the year 2009.

(2) On October 31, 201, the Plaintiff dissatisfied with the above disposition and filed an appeal with the Tax Tribunal on October 31, 201. On February 28, 2012, the Tax Tribunal decided to the effect that the Plaintiff should re-examine whether some of the 000 won that the Plaintiff received from the Nonparty was distributed to Park J and other co-inheritors, and that the relevant tax base and tax amount should be corrected according to the result of re-audit. According to the above decision, the Defendant, who conducted a re-audit and then corrected the said global income tax amount to KRW 000,000 (hereinafter referred to as the “instant disposition”).

[Ground of recognition] Facts without dispute, significant facts in this court, Gap evidence Nos. 1, 2, 4 through 6, 13 through 15 (including paper numbers), Eul evidence No. 1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

According to the judgment of this case, the non-party sold the above real estate to the non-party company and paid all of the transfer income tax. After ratification of the above sales contract between the non-party and the non-party company, the plaintiff received the remainder (=000 won) calculated by deducting the transfer income tax (=00 won) paid from the purchase price of the real estate of this case from the non-party (=00 won) and withdrawn the above subsequent appeal. Therefore, it shall be deemed that the plaintiff is the purchase price of the real estate of this case and the transfer income tax under the above sales should be deemed to have been actually borne by the plaintiff. Nevertheless, the defendant issued the disposition of this case by regarding the non-party as a honorarium and imposing the comprehensive income tax again, which constitutes a double taxation.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Article 21(1) of the former Income Tax Act provides that "other income shall include interest income, dividend income, real estate rental income, business income, wage and salary income, pension income, retirement income, and income other than capital gains as follows," and subparagraph 17 of the same Article provides that "compensation" refers to money and valuables paid for the purpose of a case in connection with administrative affairs or provision of services, etc., and whether it falls under the case shall be determined by comprehensively taking into account the motive and purpose of receiving the relevant money and valuables, relationship with the other party, amount, etc. (see, e.g., Supreme Court Decision 97Nu20304, Jan. 15, 1999).

(2) In full view of the following circumstances, based on the above legal principles, the Plaintiff’s 00 won received from the Nonparty as a result of early settlement of the dispute and the confirmation of the existing legal relationship as to whether the existing legal relationship was confirmed smoothly, and thus, it is reasonable to view that the Plaintiff’s 00 won constitutes “the honorarium” under Article 12(1)17 of the former Income Tax Act.

① Even after the death of leA, the instant real estate had been registered in the name of leA until the completion of the registration of ownership transfer in the name of the Nonparty, and there was no registration of transfer in the name of the Plaintiff, etc. who is his heir. Moreover, at the time of selling the instant real estate to the Nonparty company, the Plaintiff was not fully involved in the process of negotiations, conclusion, and performance of the relevant sales contract. Therefore, it is difficult to view KRW 000 that the Plaintiff received from the Nonparty as the sales

② As to the Plaintiff’s subsequent appeal, the Nonparty actively asserted it by submitting a preparatory document stating that the Plaintiff’s appeal should be dismissed, as he/she acquired by possession of this case’s real estate frequently. Furthermore, in light of each assertion and evidence submitted by both the Plaintiff and the Nonparty in the relevant lawsuit including the said subsequent appeal, it is difficult to readily conclude that the Plaintiff won if the said appeal was not withdrawn. Therefore, even if the Nonparty paid KRW 00 to the Plaintiff through the instant agreement, such circumstance alone cannot be deemed as the Nonparty’s person whose registration of transfer of ownership in his/her name was invalidated.

③ At the time of the instant agreement, the Nonparty had already completed the registration of ownership transfer with respect to the instant real estate in the non-party company. Accordingly, the Plaintiff’s right to claim the cancellation of the registration of ownership transfer due to the invalidity of cause is a preserved right and is disputing its validity, such as receiving a provisional disposition order against the non-party company for prohibition of disposal of the said real estate (Seoul Central District Court Decision 2009Kadan73886). Therefore, the non-party seems to have to have to have to have to promptly and smoothly resolve the dispute with the Plaintiff in order to prevent the expansion of dispute with the non

④ While the Plaintiff asserts that the initial purchase price of the instant real estate was KRW 000, and that the Plaintiff received 000 from the Nonparty was the remainder after deducting the transfer income tax paid by the Nonparty from the said purchase price, the Plaintiff did not submit objective evidence supporting the said assertion.

(3) Therefore, the Defendant’s disposition of this case, which imposed the comprehensive income tax on the Plaintiff on the Plaintiff by deeming the said KRW 000, which the Plaintiff received from the Nonparty, as the other income under Article 21(1)17 of the former Income Tax Act, is lawful.

3. Conclusion

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