Requirements for non-taxation of capital gains tax on substitute land of farmland

The purport of Article 153(2)1 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 15191 of Dec. 31, 1996) is to exempt capital gains tax on the substitute land of farmland is to protect farmers through free permission and guarantee of substitution of farmland, or to promote the development and promotion of agriculture. Therefore, it is reasonable to view that the acquisition and sale of farmland after the acquisition of farmland should be limited to the case where the farmland owned by the self-employed farmer is to be substituted for the purpose of cultivating the farmland due to the necessity for cultivation. Thus, it is reasonable to view that the residing and self-employed person should share the same period for three years or more at the new location of farmland, and that the period should be commenced at least within one year from the date of

Article 89 subparagraph 4 of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 1999); Article 153 (2) 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 15191 of Dec. 31, 1996)

Supreme Court Decision 87Nu706 Decided March 8, 198 (Gong1988, 694) 89Nu4567 Decided February 27, 1990 (Gong1990, 818), Supreme Court Decision 90Nu639 Decided May 22, 1990 (Gong1990, 1393), Supreme Court Decision 91Nu1806 Decided May 24, 1991 (Gong1991, 1799), Supreme Court Decision 95Nu3695 Decided September 29, 195 (Gong195Ha, 3642)

[Judgment of the court below]

Head of the Office of Government

Seoul High Court Decision 2001Nu14824 delivered on June 14, 2002

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

According to Article 89 subparag. 4 of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 1999), and Article 153(2) subparag. 1 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 15191 of Dec. 31, 1996), where a person acquired another farmland within one year from the date of the transfer of the previous farmland and cultivated it for three or more years, income tax on the transfer of the previous farmland shall not be imposed. The purport of such provision is to protect a farmer through free permission and guarantee of transfer of farmland, or to encourage the development and promotion of agriculture. Thus, it should be limited to cases where a person acquires and sells farmland for the purpose of substitute for cultivation (see Supreme Court Decision 95Nu3695 of Sept. 29, 195, etc.). Thus, it is reasonable to deem that the previous farmland should begin within the period of three or more years from the date of the transfer of farmland, barring special circumstances.

After finding the facts as stated in its reasoning, the lower court determined that the income from the transfer of the previous farmland of this case does not constitute non-taxable income, on the ground that it is difficult for the Plaintiff to regard the substitute farmland of this case to have cultivated the substitute farmland of this case, on the following grounds: (a) the Plaintiff transferred the previous farmland of this case, acquired the substitute farmland of this case after about seven months thereafter; and (b) the Plaintiff did not reside in the railway field where substitute farmland is located, or an area adjacent thereto for about one year and three months thereafter; and (c) even if the Plaintiff had a considerable time to construct a house at the new location of farmland, the Plaintiff cannot be deemed to have met the requirements for non-taxation prescribed in the above provision; and (d) the Plaintiff cannot be deemed to have resided immediately in the location of farmland

Examining the reasoning of the judgment below in light of the above legal principles, relevant statutes and records, the above fact-finding and judgment of the court below are just and there is no error in the misapprehension of legal principles as to non-taxation requirements for transfer income tax or by the rules of evidence in the substitute farmland.

Therefore, the appeal is dismissed and the costs of appeal are assessed against the plaintiff who is the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Byun Jae-chul (Presiding Justice)