Seoul High Court 2009Nu27765 (Law No. 31, 2010)

Seoul Administrative Court 2009Gudan1627 ( August 12, 2009)

Where 1/2 shares acquired by her husband are donated to her wife in capital gains tax reduction or exemption;

In light of the fact that one house for one household is determined by each household, even if the husband acquired a newly-built house subject to reduction and exemption by the husband and donated one-half shares of the newly-built house to the wife, it is reasonable to view the whole newly-built house as a newly-built house excluded from the house owned by the Plaintiff

The contents of the decision shall be the same as attached.

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Article 300 u300 u300 u300 n u3000 n u3000 Seoul High Court Decision 2009Nu2765 decided March 31, 2010

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The judgment below is reversed and the case is remanded to Seoul High Court.

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The grounds of appeal are examined.

1. Article 89 (1) 3 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) provides that "No capital gains tax shall be imposed on the income accruing from the transfer of one house for one household prescribed by Presidential Decree", and Article 99-3 (1) 1 of the former Restriction of Special Taxation Act (amended by Act No. 8146 of Dec. 30, 2006) provides that "any income accruing from the transfer of a newly-built house acquired by a person who first concludes a sales contract with a housing developer and pays the down payment within five years from the date of its acquisition shall be reduced by 10/100 of capital gains tax on the income accruing from the transfer of the newly-built house within five years from the date of its acquisition, and Article 89 (2) of the same Act (hereinafter "the special provisions of this case") provides that "the relevant resident shall not be deemed a newly-built house subject to Article 89 (1) 3 of the Income Tax Act."

According to the reasoning of the judgment below, the court below acknowledged that the plaintiff acquired the house of this case 1.5 billion won on September 27, 2001, and paid the down payment on the same day with respect to the newly-built house of this case with the housing construction business operator, 785 million won, and then donated 1/2 shares out of the right to sell the newly-built house of this case to the housing management business operator on December 5, 2001. The plaintiff and sonB completed the registration of ownership transfer as to the newly-built house of this case on September 10, 2004, and the plaintiff acquired the house of this case 1.59 million won on May 16, 198, and transferred the house of this case 1.5 billion won on December 4, 2006 to the housing management business operator of this case, and determined that the plaintiff 1/2 of this case and the newly-built house of this case were legitimate as the plaintiff 1/2 of the newly-built house of this case and the housing management business operator of this case.

2. However, it is difficult to accept the above determination by the court below for the following reasons.

The purpose of the special provisions of this case lies in promoting the new construction of a new house and real estate market by encouraging the sale of a house through the reduction or exemption of transfer income tax. On the other hand, the issue of whether one house for one household constitutes one house is determined by the "one household" on the basis of the "one house under social norms" and it cannot be deemed that one household owns multiple houses. The 1/2 shares of the newly-built house owned by the plaintiff individual cannot be viewed as a house owned by the plaintiff under the language and text of the special provisions of this case. In addition, in the application of the special provisions of this case, the remaining 1/2 shares of the newly-built house from the plaintiff who is the first contractor as the same household member are donated 1/2 shares of the right to purchase the newly-built house of this case, and it is difficult to view the remainder shares of the newly-built house of this case as a house owned by the plaintiff and the remaining shares of the newly-built house of this case which are not only the remaining shares of the newly-built house of this case but also the newly-built house of this case 1/2.

In contrast, the court below determined otherwise that the Plaintiff’s household constitutes two houses for one household owned by the Plaintiff’s household and one-half shares in the instant newly-built house owned by the Plaintiff’s wife. The court below erred by misapprehending the legal principles on the interpretation of the special provisions of this case and the scope of one house per household, etc., which affected the conclusion of the judgment. The ground of appeal assigning this error is with merit.

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

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