Plaintiff (Attorney Ahn Byung-soo, Counsel for the plaintiff-appellant)

Chuncheon Director of the Tax Office

September 22, 2006

Chuncheon District Court Decision 2005Guhap1365 Decided December 15, 2005

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The part exceeding KRW 141,191,130 of the disposition of imposition of capital gains tax of KRW 208,982,757 against the plaintiff on September 10, 204 by the defendant shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning for this court's explanation concerning this case is that "the non-party on March 31, 2004" is dismissed as "the non-party on March 8, 2004 to the non-party Seoul detailed Co., Ltd. on March 8, 2004," and the part on "the judgment" No. 5, No. 16 (c) is identical to the reasoning for the judgment of the court of first instance except for the following changes. Thus, it is cited as it is in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Determination

A. In principle, Article 94 (1) 2 (a) of the Income Tax Act provides that a long-term special deduction for possession of a house shall not apply in cases where a right to sell a house is transferred because the right to sell a house falls under the “right to acquire real estate” under Article 94 (1) 2 (a) of the Income Tax Act. However, according to Article 155 (16) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005), where a member of a maintenance and improvement project association who implements a housing reconstruction project, etc. under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents transfers the status of being selected as an occupant through the association, if there is no other house as of the date of transfer, the right to sell a house meeting the above requirements shall

B. Even if the sale right in this case is deemed to be a house, it is a question as to whether the period of possession of the house should be considered as the time of the acquisition of the existing house or the time of the acquisition of the sale right, in calculating the special long-term holding deduction amount.

In light of the purport of the special deduction system for long-term holding without transferring it for a long time, it is intended to give preferential treatment to income accrued in the process of sound asset formation, which is not speculative act, and to exclude the increased nominal income increase due to display after the date of acquisition from taxable objects. In the calculation of the residence period or retention period of one house for one household, in the case of a house reconstructed due to loss, collapse, aging, etc. during residence or retention period, if the house is reconstructed during residence or retention period of one house for one household, the total period of the destroyed house and reconstructed house shall be considered (see Article 154(8) of the former Enforcement Decree of the Income Tax Act), even if the existing house was converted into the sale right of this case, it cannot be deemed that there was a substantial transfer of the house, and in the calculation of the special deduction for long-term holding, if the house continues to exist as the right to acquire the house for sale, it is reasonable to view the period of possession of the house as the time of acquisition

C. Where a house is transferred, the method of calculating the special long-term holding deduction differs depending on whether the relevant house is a “high-priced house” and whether it is a “high-priced house below the standard area” among high-priced houses (see Articles 95(2), 156, 159-2, and 160 of the former Enforcement Decree of the Income Tax Act).

A high-priced house refers to the fact that the sum of the actual transaction values at the time of transfer of a house and its appurtenant land exceeds KRW 600 million (see Article 156 (1) of the former Enforcement Decree of the Income Tax Act), and in this case, since the right of sale in this case is deemed as a house, its transfer value shall be the basis for determining whether the transfer value is a high-priced house. However, as seen earlier, the transfer value of the right of sale in this case falls under the expensive house as mentioned above.

On the other hand, expensive houses below the basic area refer to apartment houses with the exclusive area of less than 149 square meters (see Article 159-2 subparagraph 2 of the former Enforcement Decree of the Income Tax Act), and as above, it is the standard for determining whether the area of housing units that can be acquired as the sales right of this case is expensive houses below the basic area. However, as seen earlier, the exclusive area of housing units that can be acquired by the sales right of this case is 161.47 square meters, so the sales right of this case does not constitute expensive houses below the basic area.

D. The plaintiff asserts that since the right to sell the housing in this case was not determined at the time of transferring the right to sell the housing in this case, it shall not be determined on the basis of the area of the housing in this case.

However, the transfer income of this case is not due to the transfer of the existing house, but due to the transfer of the ownership of this case. The plaintiff has already determined the same use and size of the house at the time of the sale of the house from the reconstruction association, and the special long-term possession deduction is possible by deeming the actual transaction value based on the ownership of this case as a house for sale, and it is reasonable to view the real transaction value as the house transfer value and the area of the house for sale as the house area (However, the acquisition time is considered as the time of acquisition of the existing house in consideration of the above circumstances), and if the "high-priced house below the standard area" is determined based on the area of the existing house, it is reasonable to determine the special long-term possession deduction as the standard area of the existing house. In this case, it is more unfavorable to the plaintiff, as argued by the plaintiff, if the basic area of the acquisition time and the remaining are calculated based on the ownership of the existing house in this case, it is difficult to determine the transfer income tax based on the ownership of the house in this case.

E. Therefore, in calculating the amount of special long-term holding deduction deduction from gains on transfer of the instant sales right, the instant disposition based on the premise that the instant sales right does not constitute a expensive house less than the basic area is lawful.

3. Conclusion

Therefore, the judgment of the court of first instance is legitimate, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

Judges Kim Jong-soo (Presiding Judge)