Examination-transfer-2018-0081 ( October 22, 2018)

It is difficult to recognize that the acquisition value is changed to the retroactive appraisal value for the purpose of reducing transfer tax after the exclusion period of gift tax on the real estate acquired by donation expires.

Since the appraisal value acquired through retroactive appraisal for the purpose of reducing capital gains tax after the expiration of the exclusion period of gift tax, it is difficult to view the appraisal value to be suitable for the purpose of tax payment, the disposition taken by the tax authority

Article 97 (Calculation of Necessary Expenses for Transfer Income)

Article 163 of the Enforcement Decree of the Income Tax Act

2018Guhap81424 Disposition of revocation of refusal to correct capital gains tax

EA and one other

Head of the District Tax Office

April 12, 2019

May 10, 2019

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

The defendant's rejection disposition against the plaintiffs on May 14, 2018, which is in excess of KRW 0,00,000, shall be revoked.

1. Details of the disposition;

A. On March 11, 2003, the plaintiffs received 1/2 shares of OO-O O-O O-O O-O O O-O O-O O-O O-O O-O O-O O-O O-O O-O O-O m m2 (hereinafter "each real estate of this case") from O-O O-O m2 (hereinafter "the gift of this case").

B. On April 7, 2017, the Plaintiffs entered into a sales contract with DDD Co., Ltd. with respect to each of the instant real estate at KRW 00,000,000, and completed the registration of transfer of DD on August 28, 2017.

C. On October 30, 2017, the Plaintiffs reported and paid KRW 0,000,000,000, each of the capital gains tax calculated based on the acquisition value of KRW 0,000,000, the amount equivalent to the Plaintiffs’ shares, out of the individual standard market price of KRW 0,000,000 at the time of donation of each of the instant real estate.

D. On November 15, 2017, the Plaintiffs requested an appraisal business entity at two sites of the instant real estate to calculate the appraisal value at the time of donation on March 11, 2003, which was at the time of donation. The Plaintiffs were calculated as KRW 0,000,000 and KRW 0,000,000,000 as a result of the appraisal.

E. On May 14, 2018, the Plaintiffs filed a request for a revision to reduce the amount of capital gains tax already reported and paid at KRW 0,000,000,000, which is the amount equivalent to the Plaintiffs’ share (hereinafter “instant appraisal value”) among KRW 0,000,000, which is the average price of the appraisal value calculated as stated in paragraph (d) by regarding the market value of each of the instant real estate as the market value of each of the instant real estate, and then re-calculated the transfer income tax as the acquisition value. The specific details are as follows.

F. On May 14, 2008, the Defendant rendered a disposition rejecting the Plaintiffs’ claim for correction on the ground that the instant appraisal value does not fall under the appraisal value assessed within three months before or after the appraisal base date, and it cannot be seen as acquisition value (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap 1 through 5 evidence, Eul 2 and 4 evidence, the purport of the whole pleadings

2. The plaintiffs' assertion

In calculating capital gains tax, the acquisition value of assets acquired by donation shall be calculated at the market price at the time of acquisition. In cases where there exists appraisal value by a reliable appraisal institution, it shall be included in the market price recognized as the market price, not at the appraisal price within the evaluation period prescribed in Article 49(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act. Therefore, the instant appraisal value falls under the market

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

A. Relevant legal principles

1) According to the main text of Article 97(1)1(a) of the former Income Tax Act (amended by Act No. 15225, Dec. 19, 2017; hereinafter the same) and the main text of Article 163(9) of the Enforcement Decree of the Income Tax Act, the acquisition value that is deducted as necessary expenses for the calculation of gains on transfer refers to the actual transaction value at the time of acquisition of the assets. In the case of donated assets, the value assessed under Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of donation is deemed as the actual transaction

According to Article 60(1) and (2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 15224, Dec. 19, 2017; hereinafter the same), the value of property on which gift tax is imposed shall be based on the market price as of the date of donation, and the market price includes the value which is generally deemed to have been established in cases of free transactions between many and unspecified persons, and the value which is recognized as the market price as prescribed by Presidential Decree, such as the expropriation and public sale price, and the appraisal price. Article 49(1)2(a) and (b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 28638, Feb. 13, 2018; hereinafter the same shall apply) one of the “value recognized as the market price as prescribed by Presidential Decree” in Article 49(1)2(a) and (b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, the average value of appraisal values appraised by two or more reliable institutions for three months before the date of donation.

B. Whether the appraisal value of the instant case can be viewed as acquisition value

1) According to the following facts or circumstances, it is difficult to view the instant appraisal value as the acquisition value of each of the instant real estate in view of the following facts and the overall purport of the entry and presentation of the evidence No. 1 as seen earlier.

(1) The appraisal value of this case is not the average value of the appraisal values appraised by at least two reliable appraisal institutions within three months before or after the date of donation which is the standard date for appraisal, but is only one of the appraisal values assessed retroactively after the lapse of at least 14 years and seven months from the date of

② Each real estate of this case was five parcels at the time of donation, which is the point of time, and due to the lapse of time, the present state of the land and surrounding environment are expected to have changed. The appraisal of each real estate of this case is based on the officially announced price in the evaluation standards, but based on the officially announced land price in consideration of regional factors, individual factors, and other factors. However, it is doubtful whether the appraiser FF’s appraisal was made based on the officially announced land price (2,00,000 square meters) of OO-O located in neighboring areas, and therefore, it is questionable whether the land price can be an appropriate standard for each real estate of this case of this case. WW’s appraisal did not present specific grounds for determining the unit price for each real estate of this case.

③ Since the exclusion period for gift tax on the donation of each of the instant real estate is ten years from the date following the statutory due date of return (three months from the last day of the month to which the date of donation belongs), the Defendant may impose gift tax on the Plaintiffs from July 1, 2004 to June 30, 2014, which is the day following the date on which three months elapsed from the last day of the month to which the date of donation belongs. However, the Plaintiffs reported and paid gift tax on each of the instant real estate based on the initial standard market price, and filed a request for a correction of transfer income tax by calculating the acquisition value of each of the instant real estate with the two appraisal institutions on November 15, 2017, where the exclusion period for gift tax was expired. Considering such circumstances, it is difficult to view that the Plaintiffs deemed that they made a request for a correction of transfer income tax only for the purpose of reducing the transfer income tax after the lapse of the exclusion period for gift tax imposition.

④ In a case where donated assets are transferred, the value equivalent to the gift tax base shall be recognized as necessary expenses for the calculation of transfer margin, and only when the transfer value exceeds the above value, the imposition of transfer income tax may prevent omission of taxation or double taxation. As such, the same should apply to the acquisition value, which is the necessary expenses to be deducted from the value of donated property and the transfer value. However, even though the Plaintiffs reported and paid gift tax based on the officially assessed individual land price of each real estate of this case, the exclusion period for imposition of gift tax was much higher than the above publicly assessed individual land price, upon the Plaintiffs’ request for reduction correction after the exclusion period for imposition of gift tax was expired. If the disposition of capital gains tax was made based on the previously assessed retroactive appraisal that is much higher than the above publicly assessed individual land price, the disposition of capital gains tax was not possible due to the Do of exclusion period for imposition

2) Therefore, the Defendant’s disposition rejecting the Plaintiffs’ claim for correction is lawful by setting the value of the instant appraisal as the acquisition value.

5. Conclusion

Since the plaintiffs' claims are without merit, all of them are dismissed. It is so decided as per Disposition.