The case holding that the income earned by the sale of real estate belongs to the business income under the Income Tax Act.

Whether the profit from the sale and purchase of a certain real estate belongs to the business income under the Income Tax Act or is subject to capital gains tax shall be determined according to the ordinary social norms, taking into account whether the sale and purchase is aimed at profit, the sale and purchase of the real estate, and the degree of continuity and repetition of business activities in light of the size, frequency, mode, etc. of the sale and purchase. Thus, if the Plaintiff acquired a significant portion of the above real estate for the establishment of a school, sold the land 77 square meters in total, 388 square meters in total, 1,580 square meters in total, 1,58 square meters in total, 132,715 square meters in total, 38 square meters in total, and 264 square meters in total, 50 million won in total, and if the Plaintiff traded the above real estate for the purpose of the above profit margin, it shall be deemed income from the sale and purchase, and the business feasibility thereof shall not be denied solely on the basis that the Plaintiff acquired a contribution to the school and sold the land.

Article 20 (1) 8 of the Income Tax Act, Article 36 subparagraph 3 of the Enforcement Decree of the Income Tax Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Lee Dong-young et al., Counsel for plaintiff-appellant)

Attorney Park Jae-il et al., Counsel for plaintiff-appellant

Head of Ansan Tax Office

Seoul High Court Decision 88Gu9666 delivered on June 21, 1990

The judgment of the court below is reversed.

The case is remanded to Seoul High Court.

In its reasoning, the lower court: (a) purchased all 7 pieces of land and 9 buildings on 39 occasions over 39 occasions as indicated in the list of attached Tables 2 through 8 of the lower judgment from 1977 to 1987; and (b) sold 56 pieces of land and 3 buildings on 38 occasions; (c) six parcels of land, such as 120 corrected Ri-ri, 120, and 295-3, Seocho-dong, Seocho-gu, Seoul, were contributed to the Plaintiff’s husband’s land before selling the real estate; (d) on the ground that the Plaintiff’s application for approval on the above establishment plan was rejected, it was difficult to view that the Plaintiff, other than the real estate in this case, was engaged in the sale of the real estate in this case from January 15, 1986 to January 22, 198; and (e) the Plaintiff acquired the land and 37 lots of land to be sold to the Plaintiff for sale of the real estate in this case’s residential area.

However, the issue of whether the sale and purchase of a certain real estate constitutes business income under the Income Tax Act or is merely subject to taxation of capital gains tax shall be determined according to ordinary social norms, taking into account whether the sale and purchase is aimed at profit, the sale and purchase of the real estate, and whether the sale and purchase of the real estate has continuity and repetition to the extent that it can be seen as business activities in light of the size, recovery and mode of business activities (see Supreme Court Decision 90Nu1045 delivered on September 25, 1990). Even according to the facts established by the court below itself, the Plaintiff’s sale and purchase of the real estate was conducted over a period of 10 years from 1977 to 1987, and its recovery and size are 26,388 square meters in total, total size 9 square meters in buildings with 388 square meters in total, and thus, the Plaintiff cannot be exempted from the pertinent real estate transaction with the intention of 50,000 square meters in total and 50,000 square meters in total.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-soo (Presiding Justice)