Daejeon District Court 2010Guhap4362 ( October 25, 2011)

Cho High Court Decision 2009Hu3508 (2010.09)

It is difficult to recognize that forest trees are subject to sale separate from forest land.

In full view of the fact that the purchaser purchased forest land as a site for constructing apartment and that there was no need to purchase forest trees separately, and that the Plaintiff is not a forestry business entity, the Plaintiff is merely merely a constituent part of the forest land or a combination thereof, and thus, it cannot be deemed a separate transaction object. Therefore, the purchase price in full constitutes income accrued from the transfer of forest land.

2011Nu981 Revocation of disposition of imposing capital gains tax

Six 1 other

The Director of Budget Office

Daejeon District Court Decision 2010Guhap4362 Decided May 25, 2011

September 22, 2011

December 29, 2011

1. Revocation of a judgment of the first instance;

2. All plaintiffs' claims are dismissed.

3. The costs of the lawsuit are assessed against the Plaintiffs.

1. Purport of claim

The Defendant’s imposition of KRW 302,222,540 of transfer income tax for the year 2006 against Plaintiff A on July 13, 2009 and the imposition of KRW 448,08,670 of transfer income tax for the year 2006 against Plaintiff B shall be revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On August 18, 1994, Plaintiff B acquired the ownership of 1/2 shares of 8,132 square meters (2,460 square meters; hereinafter referred to as “instant forest”) of Hongsung-gun Hong-gun, Hongsung-gun, Hongsung-gun, Hongsung-gun, Hongsung-gun, for inheritance by agreement and division, and Plaintiff CA acquired the ownership of 1/2 shares of the remaining 1/2 shares of the instant forest on November 26, 1996.

B. At the time of August 27, 2004, the Plaintiffs entered into a sales contract to transfer all of the shares of the instant forest to XX 1,968 million won (i.e., KRW 800,000,000) (i., KRW 800,000,000) (i.e., KRW 80,000,000, KRW 2460) (i.e., KRW 8,000,000). The Plaintiffs delayed performing their obligations to pay remainder due to the delayed procedures for approval of the housing construction project, and demanded the construction to increase the sales price for the instant forest. Accordingly, Plaintiff B entered the sales contract to KRW 1,20,000,000 on December 27, 2006 and KRW 1,599,000,0000,0000,000 won on each of the instant forests and fields for the purpose of KRW 1,200,016.

C. The Defendant recognized the purchase price of the instant forest as the real transaction price for the instant forest and calculated the transfer income tax by applying Article 96(1) of the former Income Tax Act (amended by Act No. 8144 of Dec. 30, 2006; hereinafter “former Income Tax Act”). On July 13, 2009, the Defendant imposed an imposition of KRW 302,222,540 of the transfer income tax for the Plaintiff Seoul High Court in 2006 and KRW 448,08,670 of the transfer income tax for the Plaintiff BB in 206 (hereinafter “each of the instant dispositions”).

F. On September 17, 2009, the Plaintiffs were dissatisfied with each of the dispositions of this case and filed an appeal with the Tax Tribunal on September 17, 2009, but the Tax Tribunal dismissed it on August 9, 2010.

[Reasons for Recognition: Facts without dispute, Gap evidence Nos. 1, 4, 5, and 6-1, 2, and 8-2, and Eul's evidence Nos. 3 through 6, the purport of the whole pleadings]

2. The plaintiffs' assertion or related laws

A. The plaintiffs' assertion

1) As part of the forest afforestation project in around 1960, the forest of this case was planted with 10cm to 34cm in scarcity, 20 to 40cm in scarcity (hereinafter “instant forest trees”) and the Plaintiffs transferred the instant forest trees to x Construction, subject to transactions separate from the forest of this case. However, the transfer value of the instant forest and the instant forest did not distinction between the forest of this case and the instant forest and the instant forest, but only determined each of the instant forest and the instant forest.

2) Thus, in this case, the plaintiffs transferred forest trees along with forest land, but the transfer value of forest trees and forest land cannot be separated. Thus, applying Article 43(2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890, Feb. 28, 2007; hereinafter the "former Enforcement Decree of the Income Tax Act") with respect to the forest land of this case, capital gains tax should be calculated on the basis of the standard market price as to the forest land of this case, and it should be imposed separately as forest income for each of the purchase proceeds of this case. Nevertheless, the defendant calculated capital gains tax based on the actual transaction price by deeming the entire purchase proceeds of this case as the transfer price of forest land of this case and applying Article 96(1) of the former Income Tax Act

B. Relevant statutes

Attached Form 3 is as listed in the "relevant Acts and subordinate statutes".

3. Determination on the legitimacy of each of the dispositions of this case

The key issue of this case is whether each purchase price of this case is the transfer price of forest of this case, or whether the transfer price of forest of this case is included in addition to the forest of this case as claimed by the plaintiffs, and whether the transfer price can not be separated. Ultimately, this issue is whether not only the forest of this case but also the forest of this case falls under the object of sale or sale of each purchase contract of this case, and this issue is examined.

(a) Facts of recognition;

1) XX Construction made the purchase of forest land of this case on the apartment site in order to promote the 12-dong 716-dong apartment construction project of Hongsung-gun, Hongsung-gun. As seen earlier, on August 27, 2004, the forest land of this case (2,460 square meters) was set at KRW 1.968 million (984 million for each of the plaintiffs 1/2 shares) and the purchase price was set at KRW 1.968 billion (94 billion for each of the plaintiffs 1/2 shares), but the procedures for approving the housing construction project were delayed due to the delay in performing the remaining payment obligations, and the plaintiffs demanded the increase in the purchase price of the forest of this case to be 1.3 billion won for the forest of this case (i.e., the purchase price of this case was calculated at KRW 2.1.3 billion for each of the plaintiffs B, 2.1.3 billion won for the forest of this case (i.e., the plaintiff 1., 2., 1., the forest of this case).

2) The initial sales contract concerning the forest land of this case explicitly provides that the subject of sale shall be the forest land of this case and the calculation of the purchase price shall be 800,000 won per square year, and the content that the sale price shall be determined including all obstacles to the site is printed in the same letter. The term “real estate indication” as the subject of sale is indicated in the term “real estate indication” as the term “real estate indication” in each sales contract of this case, which is calculated in 1,30,000 won per square year and 1,40,000 won per square year (unregistered but no dispute between the parties exists) is indicated in the form of the same letter, and all other accessories, such as trees, attached to the goods sold in Article 5 (Delivery of Real Estate) shall be transferred.

On the other hand, the phrase stating that the sales price shall be determined including all obstacles in the “site” under the original sales contract, which was printed in the same letter, is the same as the sales contract for the land of JungCC and the land of DaDD, in addition to the forest of this case, which is purchased in the apartment site by XX Construction purchased in the apartment site, and the above fixedCC and DaD reported the transfer income tax by using the entire sales price as the transfer price for the land.

3) The instant forest trees do not have to be registered or registered separately pursuant to the Act on the Forest Trees as part of Mazine tree Gun, which is planted on neighboring land, including the instant forest land. According to the request of the Red Gun, the value of Mazine 375,000,000,000 per 36,660 square meters, including 8,132 square meters of the instant forest land, was 36,000 square meters in total and 36,000 square meters in 11 square meters in 36,660 square meters in forest land (i.e., 5 square meters in Mazine 375,000) (i.e., 375 square meters in Mazine 378,000,0000,0000 won in 375 square meters in Mazine 86,0000,0000 won in 378,000 square meters in 286,78686,085.20

However, on February 28, 2007, the Plaintiffs reported the transfer value of the instant forest in accordance with Article 43(2) of the former Enforcement Decree of the Income Tax Act at KRW 261,037,200 on the premise that the purchase price of each of the instant forest in this case and the instant forest in this case falls under a case where the transfer value cannot be separated (Records 104,107 pages). Upon deducting the transfer value of the instant forest in this case reported by the Plaintiffs from the purchase price of each of the instant forest in this case, the value of the instant forest in this case is KRW 2,798,925,60 [the total purchase price of KRW 3.322,1,500,000 + KRW 1.722,200,000 won + KRW 52,074,200,037,200,000) 2,000 won per each of the instant forest in this case’s case’s forest in this case’s.

[Reasons for Recognition: Facts without dispute; evidence Nos. 1, 2, 3, and 4; evidence Nos. 1, 2, 8; evidence Nos. 1, 2, 11-1, 2, 3, and 10-1 through 6; the purport of the entire pleadings by the court of first instance as to the testimony of the largest witness F (excluding the part not trusted in the rear)

B. Determination

1) In light of the above facts, the following circumstances can be acknowledged with respect to each of the instant sales contracts or the subject matter of sales.

① Construction was made to purchase the instant forest land as a site for constructing apartment buildings, and there was no need to purchase the instant forest trees separately.

② Examining the entry of each sales contract of this case, which is a disposal document, the object of sale is merely interpreted as the forest of this case, and even if the contract states that the transfer of all other accessories, such as trees, etc. attached to the sale object should be made, it is merely a matter of the legal doctrine that the “other accessories, such as trees, etc., attached to the sale object” shall be delivered in order to eliminate the dispute over the delivery of the forest of this case subject to sale (only if it is deemed that the forest of this case, which is a tree, is defined as a separate object for sale, it is also a separate object for sale, and in this case, it is difficult to find the reason that the “other accessories, such as trees, etc.,” should be a separate object from the forest of this case.

③ The Plaintiffs do not constitute an object of trade independently from the forest land of this case, such as the instant standing timber is not a forestry business entity, and the instant standing timber is registered in accordance with the "Standing Timber Act" or its master method is established.

④ In addition, the initial sales contract for the forest land of this case was calculated on the basis of KRW 800,000 per square year, but the Plaintiffs demanded an increase in the sales price due to the reasons such as the delay of the contract in XX, etc. on the part of the construction side, there is no room to deem that there was a part of the value of the forest land of this case in addition to the amount calculated on the average price of the forest land of this case in each of the instant sales price, as well as the amount calculated on the average price of the forest land of this case.

⑤ According to the expert’s investigation results and objective published prices, etc., the forest trees of this case are about 83 gym occines and about 1,741,500 won. According to the Plaintiffs’ report on the transfer value of the forest land of this case at KRW 261,037,200 on February 28, 2007, the value of the forest trees of this case at KRW 2.79,8 million (one gym price is about 33,00,000,000,000,000,000,000,000,000,000) without any basis.

2) In full view of the aforementioned circumstances, the subject of each of the instant sales contracts entered into between the Plaintiffs and XX Construction is only the forest of this case and the forest of this case is merely the constituent parts or appurtenants of the forest of this case, and thus cannot be deemed a separate transaction subject. On the contrary, the remaining testimony of the first instance witness largest FF is likely to believe that the forest of this case is also the subject of each of the instant sales contracts, and the fact that each of the instant sales contracts entered the content that “all of the instant items, such as trees attached to the sale goods, shall be transferred to the sale goods,” and there is no counter-proof otherwise.

3) Therefore, each of the dispositions in this case, based on the premise that the Defendant’s sales price in this case is income accrued from the transfer of forest land in this case, is lawful.

3. Conclusion

Therefore, all of the plaintiffs' claims shall be dismissed due to the lack of reasonable grounds. Since the judgment of the first instance is unfair with different conclusions, it is so revoked and all of the plaintiffs' claims are dismissed. It is so decided as per Disposition.