Tax Tribunal 2013 Swiss0793 ( October 07, 2013)

The market price of the land sold by a corporation under construction can not be the sale price which is the future value and it is reasonable to evaluate it by the work progress rate, etc.

As long as the deposit in the name of a donor is withdrawn and the deposit in the account, etc. in the name of the taxpayer is presumed to be a donation, the disposition of cash donation is justifiable. Since the market price of the land sold by a corporation under construction cannot be the future value, and it is reasonable to evaluate the sale price by the rate of work progress, etc., it is illegal to evaluate the sale price

2014Revocation of disposition of revocation of gift tax imposition

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Head of Seocho Tax Office

July 18, 2014

August 29, 2014

1. The imposition of an OO of the gift tax (including additional tax) that the Defendant rendered to the Plaintiff on November 8, 2012 on November 24, 2008 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. One-fourth of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

The judgment as referred to in paragraph (1) and paragraph (1) of this Article, and each disposition taken by the Defendant against the Plaintiff on November 8, 2012 by OOO (including additional taxes), OO(including additional taxes), OO(including additional taxes), OO(including additional taxes) of gift tax on the gift of December 31, 2009, OO(including additional taxes), OO(including additional taxes) of gift tax on the gift of December 31, 201, O(including additional taxes) of the gift of December 31, 201, and OO(including additional taxes) of gift tax on the gift of June 30, 2012, and OO(including additional taxes) of gift tax on the gift of June 30, 2012, shall be revoked.

1. Details of the disposition;

A. The Plaintiff was a director of H Construction Co., Ltd. (hereinafter referred to as “H Construction”), BB (hereinafter referred to as “B”), and KS Co., Ltd. (hereinafter referred to as “K”). ThisCC was a type of the Plaintiff, and is the representative director of H Construction and K. On August 1, 2006, the Plaintiff acquired an OO-type forest on its ground and newly built a factory on May 9, 2009. (b) The Defendant on November 8, 2012, “thisCC was the Plaintiff’s account from 2008 to 2012.”

Since 1. 206. 8. 1. to 206. 1. 206. 1, 201, 2000 won, 2.00 won, 3.00 won, 2000 won, 2000 won, 3.00 won, 2000 won, 2000 won, 3.00 won, 6.0% of gift tax (including additional tax, 200 won, 3.0 won, 200 won, 100 won, 200 won, 3.0 won, 6% of gift tax (including additional tax, 3.0 won, 00 won, 200 won, 100 won, 6.0 won, 200 won, 200 won, 3.0% of gift tax (including additional tax, 201. 3% of gift tax) on the gift of 1. 31. 2009. 3

E. On January 29, 2013, the Plaintiff appealed and requested a trial on January 29, 2013, and was dismissed by the Tax Tribunal on October 17, 2013.

Facts without dispute over the basis of recognition, Gap evidence 1, 2 (including paper numbers), Eul evidence 1, 2, 3, 5 (including paper numbers), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) As to the gift tax on cash donation

The Plaintiff has frequently conducted fund transactions with thisCC. The Plaintiff and thisCC are in a relationship with each other with each other, and there is no reason to donate the instant amount free of charge without any reason. The transfer of ordinary money is presumed to be a transaction (loan or repayment) with a quid pro quo relationship. The Plaintiff transferred the amount to thisCC on July 24, 2009. The Plaintiff was partly repaid with the interest on loans from August 24, 2006 to July 24, 2009 and the cost of new factory construction services borrowed from thisCC as offset against the amount borrowed from thisCC. The Plaintiff was obligated to pay the amount of money to the Plaintiff under the name of this case (the Plaintiff was obligated to pay the amount to the Plaintiff’s debt to receive the amount of money more than the Plaintiff’s debt), and the Plaintiff was not obligated to pay the amount of money under the title of this case to the Prosecution’s account in the process of performing the tax investigation. However, the Plaintiff was not obligated to pay the amount of money under the name of this case.

(2) As to the gift tax on low-price transfer-taking portion

In light of the fact that the calculation of the sale price of land by multiplying the sale price of a newly constructed and sold building by the work progress rate is caused by reflecting the future value as of the date of completion, regardless of the progress of construction works, land annexed to the land is different from the site at the time of commencement of sale, landscaping works, and installation works are necessary, and land annexed to the land is a result that should be assessed as the sale price even if only a part of the construction is sold extremely without the progress of construction works, land annexed to the land should be recognized by applying the work progress rate to the sale price of land. Thus, the supplementary assessment method by applying the sale price of land is unlawful

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) (A) On September 2012, thisCC submitted to the Seoul Regional Tax Office the following certificates:

(B) On April 15, 2013, thisCC prepared and submitted to this Court a written confirmation as follows:

○ The principal confirms that cash donation has been made for the settlement of the Plaintiff’s factory construction cost and the payment of interest on loans as follows:

At the time of preparing a written confirmation to the Seoul regional tax office, it received notice to the prosecution that it accused of violation of the Punishment of Tax Evaders Act and other Punishment Act by deeming the legitimate transaction details of HG as a processing transaction.

The Seoul Regional Tax Office requests the submission of a pre-written statement to affix a seal to the pre-written statement, and the amount is relatively minor and affixed to a seal irrelevant to an offense case. Therefore, the details of the written statement are not true, and there is no fact that the Plaintiff made cash donation.

(C) On April 30, 2014, this Court stated in this Court as follows:

(2) On August 14, 2012, the Plaintiff stated in the Seoul Regional Tax Office as follows.

(3) On September 15, 2009, thisCC and its wife completed the registration of transfer on the ground of sale and purchase on June 26, 2009, with respect to No. 72 and No. 906 of the OA apartment No. 72, Dong-dong, Seoul, OO2. At the time, thisCC was transferred from the Plaintiff on July 24, 2009 to bothS, the owner, who was the owner. On the other hand, thisCC remitted OOB to the Plaintiff on November 24, 2009, and the Plaintiff immediately withdrawn OB as four cashier’s checks and then re-issued to thisCC. The said check was paid to the Defendant, the wife of thisCC, at the time of payment proposal by thisCC or its wife.

Since ○○ is between the Plaintiff and the wife, it did not separately prepare a loan certificate and a receipt, but it tried to keep the evidence of borrowing and repayment of money through account transfer.

○ On July 24, 2009, the Plaintiff borrowed OOOE from the Plaintiff and transferred the same day to the entire owners of OOdong AA apartment to the SS. The above OOE was set off against the Plaintiff’s borrowed money.

The confirmation document submitted to the Seoul regional tax office is prepared in a state of extreme mental and physical anxiety after hearing the words of accusation to the prosecutor's office. At the time, the small number of tax agent at the time was expressed and signed.

○ At the time of the preparation of the confirmation document, the National Tax Service was investigated and was not investigated by the prosecution. It is related to the penalty for HD's corporate tax to receive non-prosecution disposition by the prosecution.

The ○○ and the Loan Agreement did not provide a written contract, including the loan agreement, and borrowed it orally.

The chairperson of thisCC recommended the factory and warehouse business to purchase a factory site to be independent of the chairperson of thisCC.

○ On July 24, 2009, the reason for sending OO to thisCC is that the company borrowed from the company from the time of the purchase of factory land to the time of the purchase of the factory land, so it is thought that the company lent it to thisCC and it was remitted to repay part of the amount.

○○ Cost for the purchase of factory land and for the construction of buildings, the total cost was required by the OOO members, among which one is the OO members (the principal's ownership and retirement allowance OO members), the loan O members, and the remainder was required to be OO members until now after borrowing from thisCC.

ThisCC reported the amount of income in 2004 as the amount of income, and received the amount of OO won from KR operated by it. In addition, KR in 2004 the assets were OO won, OO capital, and net income for the net income of OO won. Meanwhile, the Plaintiff received the amount of average 4O won before retirement from the workplace in 1999, and the Plaintiff did not own real estate until 2004.

(5) At the time of the conclusion of the apartment sale contract, K entered the land value into the accounting book as an OOO won (individually published one), and on June 30, 2008, K determined the sale price of the land as OO won (OO won/land size) by adding additional compensation, reputation-building cost, etc. to the props at the time of concluding the apartment sale contract.

Accordingly, on August 31, 2008, the defendant evaluated the stock price by deducting the work progress rate (14.10%) from the sale price of the building for the newly constructed and sold building, and the OO of the sale price of the land for the annexed land, and the OO of the sale price for the annexed land.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 4, 5, 6, 18 (including paper numbers), Eul evidence Nos. 5, 8, 9, 12, and 16 (including paper numbers), the result of the fact-finding on the general office of the SCB Bank, the purport of the whole pleadings,

D. Determination

(1) As to the gift tax on cash donation

(A) In a lawsuit seeking the revocation of disposition imposing gift tax, insofar as the deposit in the name of the person who is recognized as a donor by the tax authority is revealed to have been withdrawn and deposited in the account in the name of the taxpayer, such deposit shall be presumed to have been donated to the taxpayer. Thus, barring special circumstances, such as withdrawal of such deposit and deposit in the name of the taxpayer, etc., the need to prove such fact lies on the taxpayer (see Supreme Court Decision 99Du4082, Nov. 13, 2001). In addition, if the tax authority received a confirmation from the taxpayer that a certain portion of transaction is a processing transaction in the course of the tax investigation, if it was prepared by the taxpayer, it is difficult to readily deny such confirmation as evidence of such confirmation, barring special circumstances, such as where it was forced against the intent of the originator, or it is difficult to take it as supporting material for specific facts due to lack of its content (see Supreme Court Decision 2001Du2560, Dec. 6, 2002).

(B) The sum of this case is presumed to have been deposited by the Health Team and this case, and the fact of donation by thisCC’s confirmation was presumed to have been given. The evidence submitted by the Plaintiff is insufficient to reverse the above presumption in light of the following circumstances, and there is no other counter-proof. Thus, the sum of this case should be deemed to have been donated.

① ThisCC prepared a written confirmation to the effect that the gift was recognized in the course of the tax investigation, and the Plaintiff and thisCC made a false seal due to the prosecution investigation. However, thisCC voluntarily stated that it resulted in the seal affixed according to the tax agent’s advice, there is no circumstance to deem that it was made by coercion, and there is no other circumstance to deem it as having been made by coercion. The Plaintiff was leading to the business of thisCC, and the Plaintiff was in the form of a type and a place between South and North, so it may donate money free of charge. At the time, thisCC had a considerable amount of income by the intention of KK and HD Construction, and thus, it is difficult to deny the content of the confirmation document only with the statement of thisCC by the Plaintiff and thisCC.

② The Plaintiff asserts that the Plaintiff paid the instant amount to OO on July 24, 2009. However, there is no evidence to ascertain whether OO was the source of payment of the instant amount, and that there is no clear circumstance between the Plaintiff and CC on several occasions as the Plaintiff’s assertion (this case’s transfer of OOE to the Plaintiff on November 24, 2009, immediately after deposit to the Plaintiff’s account, and the reason for OE was revealed to have been used by CC or its wife’s wife’s wife’s wife’s wife’s wife’s address. In addition, since the apartment name was 1/2 each of 1/2 shares in the borrowed amount, it cannot be deemed that OCC was paid out by 20,000, and that there was no possibility of returning OE’s initial amount and 200,000,0000,0000 won, respectively, for each of the following reasons.

(2) As to the gift tax on low-price transfer-taking portion

(A) Article 35(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 9269, Dec. 26, 2008; hereinafter the same) provides that where an asset is acquired at a price lower than the market price between persons having a special relationship as prescribed by the Presidential Decree, the amount equivalent to the profits acquired by the transferee of the asset shall be deemed to be the value of donated property. The legislative purpose of this provision is to cope with an irregular act of donation and to promote fair taxation by imposing gift tax on the profits acquired by the counterparty in the event that a profit equivalent to the difference between the price and the market price is de facto gratuitously transferred through abnormal methods that manipulate the transaction price for the benefit of the other party to the transaction. Therefore, it is very important to assess whether a gift falls under the category of donations and the value of donated property. In addition, in imposing gift tax, the “market price” means an objective exchange price formed through a general and ordinary transaction. It is recognized that the value of the asset at the time of donation reflects the objective exchange price at the time of the donation.

(B) Considering the following circumstances, the per share value per land subject to the sale price for land annexed cannot be deemed as the market price assessed in an objective and reasonable manner.

① Article 20 of the Act on the Ownership and Management of Aggregate Buildings provides that “The right to use site of a sectional owner shall follow the disposition of his/her section for exclusive use, and that the section for exclusive use shall not be disposed of separately from his/her right to use site. In addition, in the case of trading apartment houses, such as apartment buildings, the section for exclusive use and land appurtenant to the section for exclusive use are actually traded together with the section for exclusive use. In addition, in the case of trading apartment houses, the section for exclusive use and land appurtenant to the section for exclusive use are actually traded together with the section for exclusive use, and it is difficult to dispose of the land appurtenant to apartment houses, in fact where the building and land appurtenant to apartment houses have been completed, as well as where the construction has been considerably progress. Furthermore, all the building and land appurtenant to apartment construction company’s account books constitute inventory assets, and the recent trend of construction should also be deemed to have been formed on the basis of the overall sale price of the completed building and the

② Article 60(1) of the Inheritance Tax and Gift Tax Act provides that “The value of an asset on which gift tax is levied shall be based on the market price as of the date of donation,” and Article 60(2) provides that “The market price shall include the value which is generally recognized as a market price in cases of free transactions between many and unspecified persons, such as expropriation, public sale, and appraisal value, as prescribed by Presidential Decree.” In addition, Article 49(1) of the Enforcement Decree provides that “in cases of an asset deemed as a market price, such as expropriation, public sale, and appraisal value, it may be deemed as a market price during a period not exceeding three months as of the base date of appraisal (the date of donation).” As such, setting the base date of appraisal as the date of donation, and setting the time limit of the market price as three months before and after the date of donation shall

However, in assessing the net asset value of unlisted stocks based on the supplementary valuation method, applying the work progress rate to the sale price, while applying the land annexed to a new building after several years from the date of completion of the construction, it cannot be deemed that the value of the land at the time of completion of the construction is properly reflected in the asset value as of the base date of appraisal. Article 69(1) of the Enforcement Decree of the Corporate Tax Act provides that “The earnings and losses incurred from construction, manufacture, or provision of other services shall be included in the calculation of earnings and expenses for the pertinent business year, respectively, calculated based on the work progress rate as prescribed by Ordinance of the Ministry of Strategy and Finance, from the business year which includes the date of commencement of the construction to the business year which includes the date of delivery of the object.” In addition, Article 40-697(2) of the General Rule of the Corporate Tax Act provides that “The acquisition price of land shall be included in the calculation of losses in accordance with the work progress rate.” This is intended to prevent distortion of profits and losses by allocating the value of the construction at the time to the sale price (see Supreme Court Decision 2936Nu.

④ Since “market price” is a taxation requirement for calculating low-price acquisition and donated property, it should be deemed that the Defendant, the taxation authority, has the burden of proof. However, the Defendant merely claims that the asset valuation method is in accordance with the existing established rules, and did not respond to the reasonable calculation method that does not distort the calculation of the period.

(C) On the other hand, where the difference between the appraised value before sale and the appraised value before sale is assessed by the value obtained by multiplying the difference between the appraised value before sale by the rate of work progress, the appraised value before sale + (the appraised value before sale - the appraised value before sale) x (the appraised value before sale ) x the rate of work progress x all where the individual publication is applied, and when the appraised value per share is calculated by the book value of K, the appraised value per share is merely an O value at a level of 1/4 of the defendant's appraised value. Therefore, the transaction of the stock in this case traded in KRW 5,00 per share is not a case where the market value is 30% or more per share, which is the market value calculated by the book value, or the difference between the purchase price and the market value is 300 million won or more (Article 26(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act).

3. Conclusion

Thus, the plaintiff's claim is reasonable within the above scope of recognition, and the remainder is accepted.

The claim is dismissed as it is without merit. It is so decided as per Disposition.