early 201 Gwangju 5163 (2012.07)

Since it does not fall under farmland, the disposition that excluded the special deduction for long-term possession is legitimate, deeming it as land for non-business use.

Since the transferred land is recognized as being used in the landscape of a restaurant or used as a site for an outdoor wedding hall without being planted, it constitutes land for non-business use since it cannot be viewed as farmland. It is difficult to deem that there is a justifiable reason to expect the Plaintiff to report and pay the transfer income tax solely on the sole ground that the tax authority originally determined it as the land for business use.

2012Guhap2085 Revocation of Disposition of Imposing capital gains tax

Shin XX

(b) the Director of the Tax Office

October 18, 2012

December 27, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 000 against the Plaintiff on September 15, 201 is revoked.

1. Details of the disposition;

A. On March 5, 1998, the Plaintiff donated each land listed in the separate sheet (hereinafter referred to as "each land of this case") from the father of New AA to the father of this case, and completed the registration of ownership transfer in the name of the Plaintiff on the 20th of the same month.

B. On August 18, 2008, the Plaintiff sold each of the instant lands in total at KRW 000,000, and completed the registration of ownership transfer to B on September 26, 2008.

C. On November 25, 2008, the Plaintiff applied the special deduction for long-term possession for at least ten years pursuant to Article 95 of the former Income Tax Act (amended by Act No. 9270, Dec. 26, 2008; hereinafter the same) when filing a preliminary return of transfer income tax on each of the instant lands to the Defendant. On the other hand, the Plaintiff applied the special deduction for long-term possession for at least ten years pursuant to Article 95 of the former Income Tax Act (amended by Act No. 9270, Dec. 26, 2008; hereinafter referred to as “part of the instant land”), and applied the special deduction for at least eight years pursuant to Article 69 of the former Restriction of Special Taxation Act (amended by Act

D. On June 11, 2009, the Defendant confirmed that part of the instant land was used for outdoor wedding business through the on-site investigation, and determined and notified KRW 000 of the capital gains tax to the Plaintiff on June 11, 2009 by deeming that it did not meet the requirements for capital gains tax reduction and exemption.

E. The Plaintiff filed a lawsuit against the Defendant at this court (2010Guhap3626) upon filing an objection or filing a tax appeal against the Plaintiff. However, the competent court dismissed the Plaintiff’s claim on December 16, 2010 on the ground that there is insufficient evidence to support the fact that the Plaintiff had been engaged in full-time production for at least eight years on certain land of the instant case, and that the said judgment became final and conclusive around that time.

F. However, in the comprehensive audit conducted on March 2011, Gwangju Regional Tax Office pointed out that the Defendant did not apply the long-term possession special deduction and heavy tax rate even though some of the instant land was land for non-business use as farmland not self-owned by the owner, and on September 15, 201, the Defendant increased and notified the Plaintiff of KRW 000,000, including the income tax on the return and non-payment for arrears (hereinafter “instant disposition”).

G. The Plaintiff, who was dissatisfied with the instant disposition, requested a trial to the Tax Tribunal on December 5, 201, but was dismissed on February 7, 2012.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 8, Eul evidence Nos. 1, 2, and 5 (including each number; hereinafter the same shall apply)

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

1) Point of imposing capital gains tax

Since part of the instant land falls under farmland because the Plaintiff resided in its seat and directly cultivated turf for the purpose of sale, it constitutes farmland. Moreover, since the period for which the Plaintiff did not cultivate turf for three or more years immediately before the date of transfer, for three or more years immediately before the date of transfer, and for three or more years immediately before the date of transfer, does not fall under both 80/10 or more of the period of possession of land, the said land cannot be deemed to fall short of the requirements for land for non-business, and thus, it cannot be deemed to fall under the subject of heavy tax rate of capital gains tax. Even if the instant land does not fall under farmland, the Defendant must determine

2) The point of imposing additional tax

There is a conflict of opinion as to whether a part of the instant land is deemed a non-business business or not, and if the Defendant determined and notified the transfer income tax to the Plaintiff at the beginning, the Plaintiff would have paid the transfer income tax when it was imposed by determining the land for non-business use at the time of determining and notifying the transfer income tax. Therefore, it is unreasonable to impose penalty on the Plaintiff on the ground that there is a justifiable reason that the Plaintiff could not be attributable to the Plaintiff’s failure to report and pay the transfer income tax properly.

B. Relevant statutes

Attached Acts and subordinate statutes.

(c) Fact of recognition;

1) In relation to each of the instant lands, the building is located in the building of single-story 0-1, and 0-1, Nam-gu, Chungcheongnam-gu, Seoul. The Plaintiff operated a light-type restaurant from May 22, 1999 to August 31, 2001, with the trade name "OO", and thereafter leased the said building to another person.

2) Around November 1999, the Plaintiff leased a part of the instant land, which was planted with turdy, to ParkCC and used it for outdoor wedding purposes. Accordingly, the Plaintiff and ParkCC were subject to a disposition for restoration to its original state of facilities, such as NA, marina, and boats, stored on the instant land from the head of the Nam-gu Eup on March 29, 200.

3) The Plaintiff terminated the lease agreement with the ParkCC for a long time, and around September 29, 2000, the Plaintiff sold the turfy of the instant part of the instant land to Gangnam once, and around October 2005, the Plaintiff directly leased each of the instant land to the site for outdoor wedding.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 5, 7, 8, Eul evidence Nos. 2, 3, 4, 6, 7, and 8, and the purport of the whole pleading of witness E's testimony

D. Determination

1) As to the plaintiff's first argument

The term "land for non-business" in Article 104-3 (1) 2-7 of the former Income Tax Act means the land falling under any of the following subparagraphs for the period prescribed by the Presidential Decree during the period during which the relevant land is owned" in Article 104-3 (1) of the same Act, and in Article 104-1 (1) of the same Act, the term "land falling under any of the following items (hereinafter referred to as "farmland" in this Article)" shall be defined as "land which the owner does not reside in the location of such land under the conditions as prescribed by the Presidential Decree or does not cultivate himself/herself: Provided, That the same shall not apply to the cases prescribed by the Presidential Decree as farmland which may be owned by the Farmland Act and other Acts: "land other than the farmland, forest and stock farm land" is defined as "land excluding the land falling under any of the following items among the land other than the land for which the property tax is exempted or exempted under the provisions of the Local Tax Act or related Acts" in subparagraph (b) of Article 182 (1) of the Local Tax Act, "land directly related to the business or separate taxation":

Therefore, if the transferred land is farmland, it shall be deemed land for non-business use only if it does not meet certain requirements for re- village and self-defense, but if it is not farmland, forest land and stock farm land, it constitutes land for non-business use and is excluded from land for non-business use only in exceptional cases.

Therefore, in applying the provisions of Article 104-3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21301, Feb. 4, 2009; hereinafter the same) with respect to whether a part of the instant land is farmland, the determination of farmland, forest land, stock farm site and other land shall be based on the actual status except as otherwise provided in this Decree: Provided, That where the actual status is unclear, it shall be based on the registration on the public register, and the first part of Article 168-8(1) of the Act shall be "farmland" and the first part of Article 104-3(1) of the Act shall be "farmland, which is actually used for cultivation regardless of the land category on the public register as the rice field, paddy field and orchard and orchard, it shall be deemed that a part of the instant land is used in the landscape of a restaurant near a restaurant or used as a site for outdoor wedding. Therefore, it shall not be deemed farmland.

Therefore, this part of the Plaintiff’s assertion on the premise that a part of the instant land is farmland is without any need to further examine it, and otherwise, inasmuch as there is no assertion or proof by the Plaintiff as to the exceptional land of this case, the Defendant excluded the special deduction for long-term holding from the perspective of non-business use, and the disposition of this case excessive capital gains tax is lawful.

2) As to the second argument by the Plaintiff

Under the tax law, in cases where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, as prescribed by the individual tax law, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, the taxpayer’s intent and negligence is not considered as administrative sanctions. On the other hand, such sanctions should be imposed with respect to nonperformance of obligations under the tax law unless there are justifiable grounds for not being able to mislead the taxpayer of his/her failure to perform his/her obligations, such as cases where it is unreasonable for the taxpayer to be unaware of his/her obligations or where it is unreasonable for him/her to expect him/her to fulfill his/her obligations (see, e.g., Supreme Court Decision 96Nu18076, Jul. 24, 1998).

As seen in the above case, the land of this case constitutes land for non-business use, and the facts that served as the basis for the above determination were already occurred at the time of the plaintiff's preliminary return of capital gains tax, and thus, the defendant determined this as the land for business use at the time of denying the plaintiff's application for reduction or exemption of capital gains tax on a part of the land of this case, merely because the defendant decided this as the land for business use, it is difficult to view that there is a justifiable reason to expect the plaintiff to make a legitimate report or payment of capital gains tax on the part of the land of this case

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.