early 208 Heavy1591 (2008.05)

Expenses incurred in relation to the surrender of name borne by the transferee from the transfer value shall not be deducted.

The issue of whether the transfer cost falls under the substance over form principle should be determined by whether the economic substance is a quid pro quo relationship with the transfer of the relevant asset regardless of the title, and as such, the account holder’s expenses incurred in relation to the transfer cannot be deducted.

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

Article 94 (Scope of Transfer Income Tax of the Gu)

Article 95 (Transfer Income Amount under the former Income Tax Act)

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 122,715,120 against the Plaintiff on October 8, 2007 is revoked.

1. Details of the disposition;

A. On March 10, 1969, the Plaintiff acquired and owned ○○○○, 57,688 square meters and 57-○, 634 square meters and 634 square meters (hereinafter referred to as “the instant land” as “the sum of the said land”). On July 21, 2004, the Plaintiff concluded a sales contract for the instant land with ○○○, Co., Ltd. (hereinafter referred to as “○○”). On July 22, 2004, the Plaintiff completed the registration of ownership transfer to ○○ on April 4 times from July 21, 2004 to July 5, 2005, and received full payment of KRW 1.4 billion from ○○ from July 21, 2004 to July 5, 2005.

B. In paying transfer income tax due to the above transfer, the Plaintiff asserted that KRW 500,000,000,000,000 for the purchase price of the instant land was paid as compensation for the removal of buildings and the year of land to the persons holding the superficies who owned the instant land (i.e., KRW 1.4 billion - 521 billion) and calculated as transfer value the above amount (i.e., KRW 1.., KRW 1.49 billion - 521 billion) and calculated as transfer value under Article 97(1)1(c) and proviso to Article 97(1) of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same shall apply), Article 96(1)6 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same shall apply), Article 163(12) and 79750.7

C. On October 8, 2007, the Defendant recognized the transfer value of the instant land as KRW 1.4 billion, which is the full purchase price. Pursuant to Articles 163(12) and 172(2) through (4) of the former Enforcement Decree of the Income Tax Act, the acquisition value of KRW 429,026,814 calculated by the conversion price as of January 1, 1985, and Article 97(3)2 of the former Enforcement Decree of the Income Tax Act, and Article 163(6)1 of the former Enforcement Decree of the Income Tax Act, minus KRW 11,974,50,00 as necessary expenses calculated pursuant to Article 163(6)1 of the former Enforcement Decree of the Income Tax Act (i.e., acquisition value of KRW 1.429,026,814 - Necessary expenses 11,974,500) as transfer gains, the Defendant already determined the transfer income tax amount of KRW 11,97281,297.257

D. On January 3, 2008, the Plaintiff dissatisfied with the instant disposition and filed an objection against the head of Chuncheon Tax Office on January 3, 2008, but the decision of dismissal was rendered on January 29, 2008. The Plaintiff filed a request for a trial with the Tax Tribunal on April 29, 2008, but also rendered a decision of dismissal on September 5 of the same year.

[Ground of Recognition] Facts without dispute, Gap 1 through 4, 10, 13, 14, and Eul 1 through 5 (including each number)

2. Relevant statutes;

Article 94 (Scope of Transfer Income Tax of the Gu)

Article 95 (Transfer Income Amount under the former Income Tax Act)

3. The plaintiff's assertion and the judgment of this court

A. The plaintiff's assertion

(1) At the time of concluding a sales contract between the Plaintiff and ○○○, the court agreed to take over ○○○○ upon the Plaintiff’s conciliation of the building owner on the instant land. Of the sales price 1.4 billion won received from ○○○○○○, KRW 521 million, out of the sales price received by the Plaintiff, the Plaintiff received KRW 1.42 billion from ○○○○○, and paid to the said building owner instead of ○○○○○○. Therefore, even though the remaining amount of KRW 879 billion, which was deducted from the above nominal expenses, should be deemed as the sales price and the transfer price should be recognized, the Defendant erred by recognizing the full amount of KRW 1.4 billion as the transfer price and making the instant disposition.

(2) Even if the above pre-sale cost should be included in the transfer value, the above pre-sale cost constitutes necessary expenses to be deducted from the transfer value, but the Defendant’s calculation of transfer margin without deducting the above pre-sale cost and the instant disposition is unlawful.

B. Whether only the amount calculated by deducting life-saving expenses from the purchase price should be recognized as the transfer value

(1) Article 95(1) of the former Income Tax Act provides that the transfer value of assets shall be the total amount of income generated from the transfer of assets. Here, “total amount of income” shall not refer to the objective value of the assets concerned, but to all income acquired by the transferor as compensation for the transfer of the assets in a specific transaction. Whether the assets fall under the price shall be determined by whether the economic substance is in a quid pro quo relationship with the transfer of the assets in question, regardless of the title or pretext under the principle of substantial taxation (see, e.g., Supreme Court Decision 92Nu2967, Jul.

(2) In the instant case, comprehensively taking account of the overall purport of arguments as to Gap evidence Nos. 5 through 12, Eul evidence Nos. 3 and 5 (including various numbers), the plaintiff filed a lawsuit to remove the building and to transfer the land of this case on the ground that the term of lease has expired for the lease of the land of this case, and as a result, on May 13, 2004, the plaintiff paid a total of KRW 725 million to the non-party 57, and at the same time received the registration of ownership transfer of the building of this case and the delivery of the land to the non-party 57, and ② the plaintiff and ○○○ Won concluded a sales contract for the land of this case, and the purchase price of the building of this case was KRW 1.4 billion, but the plaintiff paid KRW 25 billion to the plaintiff from 200 billion to 4.4 billion to 25 billion to 205 billion to 200 million to 4.4 billion to 25 billion to 25 billion won to 25 billion.4 billion won.

(3) According to the above facts, 1.4 billion won is the economic substance of the purchase price received by the Plaintiff from ○○○○○○, and the purchase price paid by the Plaintiff to the building owners is merely the cost paid for the removal of the building impeding the use of the instant land and the transfer of the building by the ○○○○○○, the purchaser of the instant land, and thus, should not be deducted in calculating the transfer price. Thus, the Defendant’s calculation of the total purchase price by the transfer price is lawful.

C. Whether the prestigious cost should be deducted from the transfer value as necessary expenses

(1) According to the aforementioned relevant Acts and subordinate statutes, ① the former Income Tax Act and the Enforcement Decree of the same Act list “acquisition value”, “capital expenditure and transfer expense, etc. to be deducted from the transfer value in calculating gains on transfer (Article 97(1) of the Act), and ② in case of land, the standard market price at the time of acquisition shall, in principle, be the acquisition value. However, where the transferor files a report on the actual transaction price at the time of acquisition by the due date of final return, it shall be based on the actual transaction price (Article 97(1)1 (a) and Article 96(1)6 of the Act). (3) In this case, the actual transaction price at the time of acquisition cannot be confirmed, and the actual transaction price at the time of acquisition shall be calculated by multiplying the actual transaction price at the time of acquisition by 10/100 of the actual transaction price at the time of conversion by 40/160 of the Enforcement Decree of the same Act (Article 97(1)1 (c), Articles 163(2) through (4) of the Enforcement Decree of the same Act).

(2) In this case, the amount of expenses paid by the Plaintiff to the owner of the building on the ground of this case among the pre-sale expenses paid by the Plaintiff to the owner of the building on the ground of this case cannot be deducted from the transfer value of the land of this case in addition to the amount under Article 163 (3) 3 of the former Enforcement Decree of the Income Tax Act, or the expenses paid for the alteration, improvement or convenience of the use of transferred assets under Article 163 (3) 4 of the former Enforcement Decree of the Income Tax Act, Article 79 (1) 2 of the former Enforcement Decree of the Income Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 476 of Dec. 31, 2005). However, as long as the acquisition value of this case is calculated based on the conversion value because the actual transaction value of the land of this case cannot be confirmed at the time of 1969, the Plaintiff's assertion on this part is without merit.

Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.