The criteria for calculating gains on transfer where the actual transaction price is confirmed in a lawsuit seeking cancellation of a disposition imposing transfer income tax under the former Income Tax Act (Act No. 3098 of December 5, 1978)

In imposing transfer income tax under the former Income Tax Act (Act No. 3098, Dec. 5, 1978), even if the tax authority was unable to know the actual transaction price of the transfer and acquisition of assets because the taxpayer failed to make a final return on the marginal profit accruing from the transfer of assets or the final return on the profit accruing from the transfer of assets, if the actual transaction price is confirmed at the time of the closing of the argument for cancellation of the taxation disposition, the transfer and acquisition

Articles 23(4) and 45(1) of the former Income Tax Act (Act No. 3098, Dec. 5, 1978); Articles 170(3) of the former Enforcement Decree of the Income Tax Act (Presidential Decree No. 9698, Dec. 31, 1979)

Supreme Court Decision 85Nu350 Decided February 11, 1986, 85Nu922 Decided July 8, 1986

[Judgment of the court below]

Head of Western Tax Office

Seoul High Court Decision 86Gu182 delivered on July 16, 1986

The appeal is dismissed.

The costs of appeal shall be borne by the defendant.

The grounds of appeal are examined.

1. According to the reasoning of the judgment below, the court below acknowledged that the plaintiff purchased 400,000,000 won from the non-party 1 on June 3, 1968 and completed the registration of ownership transfer on the land as indicated in the judgment of the court below, and borrowed 5,00,000 won from the non-party 2 on March 31, 1976 and made a provisional registration on April 1, 1976 on the above land as collateral, but when the above non-party 2 was unable to repay the above borrowed money, the court below decided that the principal and interest of the above borrowed money was 5,500,000 won and transferred the above land to the non-party 2 as payment in kind for the above land, and found that the above real acquisition and transfer value of the above land was unclear, and thus, it is justified in the misapprehension of the legal principles as to the above tax assessment based on the standard market price and the transfer value of the above recognition, and thus, it cannot be viewed that the above tax amount exceeded 161,015,205 won.

2. According to Articles 23(4) and 45(1)1 of the Income Tax Act (Act No. 3098, Dec. 5, 1978), where the transfer price and acquisition price are based on the same actual transaction price, and where the actual transaction price is unclear, it shall be based on the standard market price at the time of transfer and acquisition of the assets. According to Article 170(3) of the Enforcement Decree of the same Act (Presidential Decree No. 9698, Dec. 31, 1979), where the transfer price and acquisition price are determined based on the standard market price, or where it is deemed that the actual transaction price has not been reported differently from the actual transaction price, even if the taxpayer did not make the transfer price or final return, so the tax office cannot know the actual transaction price, and thus, if the actual transaction price has been determined by the transfer price and acquisition price at the time of the cancellation lawsuit, the court below's determination of transfer price and acquisition price based on the standard market price at each of the parties.

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

Justices Kim Jong-sik (Presiding Justice)