The case affirming the disposition imposing corporate tax on the company's capital gains on the grounds that the company purchased the market site with the funds borrowed from shareholders, newly built the commercial building, and transferred the company's share in the site and the commercial building to shareholders as payment in kind.

After merchants establish the Plaintiff Company by themselves as their shareholders, the Plaintiff purchased the land with the funds needed to purchase the market site and construct the market building by allocating them to each shareholder and lent them to the Plaintiff. However, if the Plaintiff is unable to repay the borrowed money within 10 years, the Plaintiff decided to transfer the borrowed money to each shareholder from financial institutions, etc., the Plaintiff purchased the land with the funds borrowed from the shareholders, constructed the building on that date, and registered the land as the Plaintiff’s fixed assets on the account book and filed a corporate tax return. As above, if the commercial store constructed has been specifically occupied and used by each shareholder, and the Plaintiff transferred the right to share in the building and the site to the Plaintiff or his successor, the ownership of the instant market and the commercial building is not a separate character, not a specific shareholder, but a specific shareholder, and the transfer of the land to the Plaintiff is deemed to be payment in kind for the borrowed money. Therefore, the disposition of imposition of corporate tax, etc. on the transfer income in this case is justified.

Article 1(5) of the Corporate Tax Act

Cheong Dong-dong, Inc.

Head of Cheongju Tax Office

Seoul High Court Decision 87Gu55 delivered on January 17, 1990

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

We examine the Plaintiff’s ground of appeal.

According to the reasoning of the judgment below, the court below acknowledged that the non-party Kim Hong, etc., the merchants of this case, were the shareholders of this case on October 6, 1975 and established the plaintiff company on the market site purchase and the share of co-ownership of the building site of this case by allocating them to the shareholders on or around June 1976, the plaintiff purchased the land with the funds, newly constructed the building, and decided to transfer the funds from financial institutions, etc. as collateral, but if the loan is not made within 10 years, the court below decided to transfer the above loan money to the shareholders. The plaintiff purchased the land with the funds borrowed from the shareholders and newly constructed the building and registered it as the plaintiff's fixed assets on the account book and filed a report on the corporate tax. Since each of the above stores was occupied and used by the shareholders, and the plaintiff transferred the right to share in the commercial building and the building site of this case to the shareholders or their successors, the court below's decision is just in light of the legal principles as to the acquisition and new construction of the land of this case and the real estate of this case.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Sang-won (Presiding Justice) Lee Jong-won (Presiding Justice)