Unless it is deemed a construction business that has continuity and repetition to the extent that it can be seen as business activities, it is unreasonable to claim necessary expenses for the construction business unless it is deemed a construction business.

The argument that the income from the transfer of real estate is not continuous and repeated to the extent that it can be seen as business income, and that the claim that the income from the transfer of real estate is recognized as necessary expenses under the premise that the construction business is concerned is not reasonable, and it is not reasonable to view brokerage commission

Article 19 of the Income Tax Act, Article 94 of the Income Tax Act

2016Guhap2206 Revocation of Disposition of Imposing capital gains tax

Park AA

BB Director of the Tax Office

December 2016 08

December 29, 2016

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 722,462,870 for the Plaintiff on August 21, 2015 shall be revoked.

1. Details of the disposition;

A. On December 23, 2005, BB-dong BB-dong 376-1 large 149 square meters, 376-7 large 331 square meters, 376-10 large 376-10 square meters, 376-12 large 345 square meters, 376-13 large 376-13 square meters, and 153 square meters for auction. Each of the above lands was combined with BB-dong BB-dong 376-1 large 1,041 square meters on January 30, 2012 (hereinafter “the land of this case”).

On June 25, 2012, the Plaintiff sold 11/100 of the shares in the instant land No. 1 toCC Comprehensive Construction (hereinafter referred to as “CC Comprehensive Construction”), but on August 11, 2014, again acquired the said shares fromCC Integrated Construction. On the other hand, on March 11, 2014, the Plaintiff acquired BB Dong BB Dong 376-15 large 68 square meters (hereinafter referred to as “second land”).

B. On August 30, 2014, the Plaintiff sold the instant land Nos. 1 and 2 to DoD Co., Ltd., and on August 30, 2014

12.1. It completed each registration of ownership transfer on the land Nos. 1 and 2 in DoD Co., Ltd.

C. On February 28, 2015, the Plaintiff reported KRW 120,00,00,00 for the transfer value of the instant land Nos. 1 and 2, and KRW 1,421,79,290 for the acquisition value, and necessary expenses as KRW 1,268,510,00 for the transfer income tax of KRW 120,02,610 for the year 2014.

D. The Defendant did not recognize KRW 148,439,20 of the acquisition price of the instant land Nos. 1 and 2, and KRW 1,212,010 of the necessary expenses, respectively, and notified the Plaintiff of KRW 722,462,870 of the capital gains tax for August 24, 2015 (hereinafter “instant disposition”) for the Plaintiff on August 24, 2015 (hereinafter “instant disposition”).

E. The Plaintiff is dissatisfied with the instant disposition and filed an objection on November 23, 2015, on January 27, 2016.

Although an appeal was filed, on April 20, 2016, there was a decision to dismiss the appeal.

(Reasons for recognition) Each entry of Gap evidence 1, 56, 57, Eul evidence 1 through 3 (including numbers; hereinafter the same shall apply), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In full view of the following: (a) the Plaintiff purchased each of the instant lands for construction business; (b) a series of activities, such as construction design, application for permission, etc., which can be seen as activities of construction business after the considerable period of time; (c) the Plaintiff is in the position of inside director for joint business with EE Construction Co., Ltd. (hereinafter “EE Construction”); (d) the Plaintiff registered as a real estate rental business operator to lease housing, etc.; and (e) the Plaintiff reported the income from the transfer of each of the instant lands Nos. 1 and 2 as capital gains by the erroneous guidance of the public official in charge of the Defendant’s side, the income from the transfer of each of the instant lands shall be deemed as business income, not capital gains;

2) The actual transaction of part 11m2 (11/100 of shares) out of the instant land No. 1

The value of the instant land is KRW 40,000,000, not KRW 14,000 under the contract, but KRW 40,000. The actual transaction value of the instant land is KRW 200,000,000, not KRW 90,000 under the contract, and the actual amount of the brokerage commission is KRW 40,000,000, not KRW 28,000,000, not KRW 28,000,000 issued by cash receipt. In addition, the loan interest on the instant land acquisition and payment for the construction cost, such as the loan interest, design cost, management consulting fee, settlement fee paid to the EJ, etc. for the acquisition of the instant land and the payment for the construction cost, and the construction permit premium, etc. is considered as necessary expenses inevitably disbursed by the Plaintiff to run the construction business

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) As to the Plaintiff’s first argument

A) Determination of whether the income from the transfer of real estate is business income or capital gains under the Income Tax Act shall be based on ordinary social norms, taking into account the transferor’s acquisition and holding of real estate, whether the transfer is made, whether the transfer is made, the scale, frequency, mode, other party, etc. of the transfer, as well as the continuity and repetition of business activities. In making such determination, not only the transfer of real estate but also the transfer of real estate should be taken into account when the transfer was made throughout the entire real estate owned by the transferor (see, e.g., Supreme Court Decision 2014Du5385, Jul. 24, 2014).

B) Considering the overall purport of pleadings as stated in No. 4, No. 10 through No. 14, No. 20, No. 21, No. 23, No. 26, No. 30, No. 43, and No. 44, the Plaintiff was registered as a director of E Construction for the main purpose of the construction business from June 21, 2005 to May 2, 2006, and the Plaintiff was registered as an internal director at the time of the establishment of IMFF, and it is difficult for the Plaintiff to view that it was difficult for the Plaintiff to enter into a new real estate construction contract with the Plaintiff as a new real estate sales business income for the first time, and that it was difficult for the Plaintiff to enter into a new real estate sales contract with the Plaintiff as a new real estate sales business income for the second time, and that it was difficult for the Plaintiff to enter into a new real estate sales contract with the Plaintiff to enter into a new real estate sales business for the second time, and that the Plaintiff acquired the construction permit for the construction permit for the second time.

2) As to the second argument of the Plaintiff

A) As to the acquisition value of the first and second lands of this case

Comprehensively taking account of the overall purport of the pleadings as to Gap evidence Nos. 56, 57 and Eul evidence Nos. 4 and 5, the plaintiff prepared a sales contract stating that 11/1041 of the share in the land of this case shall be purchased at KRW 14,00,000 between the GeneralCC Construction on July 24, 2014. The plaintiff reported acquisition tax on August 11, 2014 with the acquisition value of KRW 14,00,000, and issued a certificate of completion of real estate transaction contract. The copy of the register (the entire registered certificate) also states that the transaction value of the above share shall be KRW 14,00,000, and the transaction value of the above share shall be KRW 14,000,000, KRW 200, KRW 90, KRW 200, KRW 300,000, KRW 200, KRW 300,000.

According to the above facts, it is reasonable to view that the acquisition value of 11/1041 of the shares in the land No. 1 of this case is KRW 14,00,000, and the acquisition value of the land No. 2 of this case is KRW 90,00,000, and

The written evidence Nos. 45 through 47 alone is insufficient to reverse it. Therefore, the Plaintiff’s objection is therefore insufficient.

Part of the argument is without merit.

B) As seen earlier, the Plaintiff cannot be deemed to have transferred land Nos. 1 and 2 as part of the construction business as part of the construction business’s business. Therefore, the Plaintiff’s assertion premised on this cannot be deemed to have been justifiable without any need to further examine (However, it appears that the Plaintiff’s assertion regarding necessary expenses for the transfer income is included in the Plaintiff’s assertion, and this is examined at

C) With respect to brokerage commission

The plaintiff alleged that he paid a total of KRW 40,000,000 as a brokerage commission in the transfer of land Nos. 1 and 2 of this case. However, there is no evidence to acknowledge this, and this part of the plaintiff's assertion is without merit.

D) As to the interest on loans for acquiring land 1 of this case

Although the Plaintiff asserts that the borrower for acquiring land 1 of this case constitutes necessary expenses, each subparagraph of Article 97(1) of the Income Tax Act limits necessary expenses to the amount prescribed by Presidential Decree, such as the acquisition value and the amount of capital contribution, etc. to be deducted from the transfer value when calculating gains on transfer, and Article 163 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26067, Feb. 3, 2015; hereinafter the same) lists each such amount as prescribed by Presidential Decree, such as the actual transaction price and capital expenditure, and transfer expenses, etc. prescribed by Presidential Decree. The interest on the loan of land 1 of this case claimed by the Plaintiff does not fall under any of the necessary expenses listed in the above statutes. Considering that the interest on the loan of land 1 of this case claimed by the Plaintiff does not fall under any of the necessary expenses, and that there is a problem of equity between the person who acquired the transferred asset and the person who acquired the transferred asset, it is legitimate to recognize the interest on the loan as necessary expenses.

E) As to the settlement costs paid to Lee J et al.

Article 97(1)2 of the Income Tax Act and Article 163(3)2 of the former Enforcement Decree of the Income Tax Act where litigation is instituted after acquiring transferred assets, which are necessary expenses deductible from the transfer value in calculating gains on transfer under Article 97(1)2 of the Income Tax Act, “the cost of lawsuit and the cost of reconciliation, etc. directly spent to secure the ownership of the transferred assets,” refers to the cost of litigation or the cost of reconciliation, etc. directly paid by the transferor in order to secure the ownership of the transferred assets after acquiring the transferred assets. Therefore, without dispute over the validity, etc. of the acquisition of transferred assets, the cost of lawsuit or the cost of reconciliation, etc. disbursed to prevent the risk of loss of ownership caused by a dispute over the performance of a contract separately established from the acquisition of transferred assets, shall not be included (see, e.g., Supreme Court Decision 201

In full view of the overall purport of the arguments in evidence Nos. 54 and 55, the plaintiff paid KRW 73,810,000 to Kim K (JJ) from February 3, 2005 to April 17, 2006, although the plaintiff acquired the land No. 1 by auction on December 23, 2005, the plaintiff acquired the land of this case on December 23, 2005 as above, and there is insufficient evidence to acknowledge that there was a building with legal superficies on the above land at the time the plaintiff acquired the land No. 1 of this case by auction, and there is no other evidence to acknowledge it otherwise. Thus, the above sum including the money paid before the acquisition date of this case, including the expenses directly incurred in order to secure ownership due to dispute over the validity, etc. of the land acquired in this case, or the expenses incurred in relation to the alteration of use of the land of this case or the necessary expenses prescribed in Article 163 (3) 3 and 4 of the former Enforcement Decree of the Income Tax Act.

In addition, comprehensively taking account of the purport of the entire arguments as to Gap evidence Nos. 15 through 18, the plaintiff paid 200,000,000 won to LeeJ from December 18, 2008 to May 28, 2009, and the reason why the plaintiff paid the above money seems to have been to have been returned in possession of the land No. 1 of this case by Lee JJ as container stuff. However, the above payment of money was occurred after the plaintiff acquired the land No. 1 of this case and the HH Construction approved the new construction of the apartment house on the land No. 1 of this case around January 2006, in light of the fact that the above fact alone constitutes necessary expenses for the land of this case.

Now, it seems that this constitutes costs incurred due to disputes over the implementation of contracts separately established.

Therefore, this part of the plaintiff's assertion is without merit.

F) Regarding design expenses, management consulting fees, etc.

The Plaintiff interest on a loan for the payment of the construction cost, the aggregate of the design cost paid by the Plaintiff to the Jeju LODPT Co., Ltd. from January 26, 2006 and February 28, 2006, 15,000,000, 65,000,000, and the aggregate of the design cost paid by the Plaintiff to the Jeju LODPT Co., Ltd. from August 1, 201 to June 13, 2012, and 19,20,00,000,000

원, 주식회사건축사사무소 아 PPP에 2012. 9. 26.부터 2012. 12. 11.까지 지급한 설계비 합계 8,000,000원, 백QQ에게 2014. 4. 18.부터 2014. 11. 28.까지 지급한 인도불능으로 인한 설계비 보상금, 전세보증금 합계 315,000,000원, CC종합건설을 위하여 2014. 7. 대신 지급한 체납 산재보험료, 법인세, 차입금 합계 42,000,000원 등이 필요비용에 해당한다고 주장한다. 살피건대, 앞서 라)항, 마)항에서 본 소득세법 및 구 소득세법 시행령의 규정, 관련 법리 등에 비추어 보면, 원고가 주장하는 위 각 금원이 소득세법 제97조 제1항, 구 소득세법 시행령 제163조 등에 규정된 이 사건 제1, 2토지의 소유권을 확보하기 위하여 직접 지출한 비용이나 이 사건 제1, 2토지의 용도변경・개량 또는 이용편의를 위하여 지출한 비용 등 필요경비에 해당한다고 볼 수 없으므로, 원고의 이 부분 주장도 이유 없다.

G) Sub-determination

Therefore, the second argument of the plaintiff is without merit.

3. Conclusion

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