Suwon District Court 2013Gudan12083 ( December 17, 2014)

If the acquisition value is unclear and the estimated deduction for necessary expenses is applied, it is legitimate.

The book value stated in the calculation statement, etc. of the depreciation amount submitted is insufficient to recognize that it is the real acquisition value of a building, and it is reasonable to view that it constitutes a case where the real acquisition value of a building cannot be confirmed because there is no data to calculate the real

2015Nu31802 Revocation of Disposition of Imposing capital gains tax

O KimO

O Head of tax office

Suwon District Court Decision 2013Gudan12083 Decided December 17, 2014

July 14, 2015

August 25, 2015

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the court of first instance is revoked, and the defendant revoked the disposition of imposition of capital gains tax of KRW 25,073,310 on August 13, 2012 against the plaintiff on August 13, 2012.

1. Details of the disposition;

A. Acquisition and transfer of the real estate of this case

1) On July 14, 1982, the Plaintiff purchased OO-dong O-dong 221-5 large scale 547 square meters (hereinafter “instant land”) and newly constructed a building (hereinafter “existing building”) on the above land.

2) Around July 15, 1993, the Plaintiff concluded a lease agreement with the content that the instant land and existing buildings are leased to two persons, other than EO, as follows.

The rent shall be paid as the 3 million won per month from January 1, 1994 to the later payment, and shall be paid as the 0 million won from January 1, 1994 to December 31, 1994 from January 1, 1994 to December 31, 1994; and thereafter, the 2 million won shall be repaid as the 3 million won from the end of each month by depositing the 3 million won in the deposit passbook in the name of the lessor at the end of each month.

3) In accordance with the above lease agreement, the existing building is demolished around 1993, and the land of this case is known and c

In addition, the third lux roof was newly built of three neighborhood living facilities (21.35 square meters, 100.87 square meters, 20.87 square meters, 97.75 square meters, 3 stories, 97.75 square meters, hereinafter referred to as "the instant building"). The Plaintiff completed the registration of initial ownership in relation to the instant building as 00 registry offices received on January 20, 1994 as 4275 square meters.

4) Upon the termination of a lease agreement with EO and two other parties, the Plaintiff entered into a lease agreement with EO on February 13, 2008 to lease the first and second floors of the instant building from April 1, 2008 to March 31, 2013, the lease deposit amount of KRW 00 million until March 31, 2010 (or additional payment of KRW 0 million until April 1, 2010), and the rent of KRW 00 million per month (value-added tax separate).

5) On June 12, 2009, the Plaintiff sold the instant real estate in KRW 000,000 (hereinafter “transfer”) to thisB, and completed each registration of transfer of ownership on June 12, 2009 with the 00 registry office received on June 17, 2009 as 000, each of the instant real estate was made for sale on June 12, 2009.

B. Plaintiff’s report of capital gains tax base

1) On August 26, 2009, when the Plaintiff filed a return on the tax base of transfer of this case with the Defendant on the transfer of this case, the Plaintiff asserted that the second and third floors of this case were used as a house, and that the entire building of this case constitutes the “high-priced house” under Article 95(3) of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same shall apply) and Article 95(3) of the former Enforcement Decree of the Income Tax Act, Articles 156(1), 156(2), and 154(3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21934, Dec. 31, 2009; hereinafter the same shall apply), and thus, applied Article 95(3) of the former Income Tax Act and Article 160(1) of the former Enforcement Decree of the Income Tax Act.

2) Specific items of the instant report are as follows.

○ The transfer value of the instant real property: The actual transfer value of the instant real property KRW 00 million (the part of the instant land)

Sector00 won + 000 won for the building of this case)

○ The acquisition value of the instant real estate: 000 won (the conversion value of the instant land + the actual acquisition value of the instant building 000 won)

○ Other necessary expenses: 00 won (total of 230 million won, brokerage commission,00 million won, and total of the input tax amounts of fixed assets on the value-added tax return from February 2, 2005 to February 2006).

C. The initial disposition of this case

1) The Defendant conducted a field investigation on the instant report from April 16, 2012 to April 30, 2012, and determined that the third floor of the instant building is a house, but the second floor is used as a space for restaurant business. Of the instant building, the third floor of the instant building is exempt from one house for one household under Article 89(1)3 of the former Income Tax Act and Article 154(3) of the former Enforcement Decree of the Income Tax Act, and on August 13, 2012, the Defendant applied Article 95(1) of the former Income Tax Act to the Plaintiff on August 13, 2012 by deeming that the remaining part should be taxed as a commercial building, and thus, rendered a disposition of imposition of KRW 00 (excluding KRW 00,000,000,000,000,000, which was declared as the amount of tax to be paid, from the total determined tax amount of KRW 00,000.

2) Specific items that served as the basis for the original disposition of the instant case are as follows.

○ The transfer value of the instant land and the instant building: 000 won of the actual transfer value (the amount calculated by deducting 000 won of the portion of the instant building from the actual transfer value of the instant real estate)

○ The acquisition value of the portion of the instant land and the instant building: 000 won [the conversion value of the instant land + 000 won + the actual acquisition value of the portion of the instant building constitutes the portion of the commercial building out of 000 won (the actual acquisition value of the instant building corresponding to the portion of the commercial building out of 000 won. The above KRW 000,000,000,000 won for sales compensation prior to the maturity of lease, urban gas entry cost, and local tax paid amount, among other necessary expenses claimed by the Plaintiff at the time of the instant report];

○ Other necessary expenses: Brokerage commission 000 won (the plaintiff’s remaining necessary expenses are not accepted in entirety).

D. Decision of the Tax Tribunal on the initial disposition of this case

1) On October 9, 2012, the Plaintiff was also the second floor among the instant buildings.

Since the building in this case falls under the home, the whole building in this case should be considered as 'high-priced house', and ② the acquisition value of the building in this case should be calculated as 000 won, which is real acquisition value, and ③ a request for a trial (hereinafter referred to as 'the request for a trial in this case') was filed with the Tax Tribunal, alleging the purport that about KRW 0

2) When the decision on the instant appeal was delayed, the Plaintiff filed a lawsuit with the Suwon District Court seeking the revocation of the initial disposition on August 5, 2013.

3) On December 31, 2013, the Tax Tribunal rendered a decision that "the initial disposition of this case is the second floor of the building of this case as housing, and the tax base and tax amount are corrected, and the remaining appeal is dismissed (hereinafter "the decision of this case"), and accepted the plaintiff's assertion, and the above 1) (1), (2), and (3) argument is rejected.

E. Disposition of this case

1) On January 22, 2014, the Defendant: (a) applied Article 95(3) of the former Income Tax Act and Article 160(1) of the former Enforcement Decree of the Income Tax Act by deeming the entire building of this case as “high-priced house”; (b) reduced KRW 00 of the transfer income tax amount of the initial disposition of this case; and (c) issued a disposition to rectify the tax amount on the transfer of this case as KRW 00 (hereinafter “instant disposition”).

2) Specific items constituting the basis for the instant disposition are as follows.

○ The transfer value of the instant real estate: The actual transfer value (00 won for the instant land + 000 won for the instant building)

○ The acquisition value of the real estate of this case: 000 won converted value (the land of this case + 000 won of the building of this case + the defendant recognized as the real acquisition value of the building of this case while taking the initial disposition of this case; 1.0 million won of the sale compensation prior to the maturity of lease; 2.0 million won of the sale compensation prior to the maturity of lease; and 3.0 million won in the name of the compensation, and 3.0 million won in the name of the compensation; and 4.0 million won

○ Other necessary expenses: 000 won, which is 3% of the standard market price of the instant real estate (3% of the instant land + 000 won of the instant building)

[Reasons for Recognition] Facts that there is no dispute between the parties, Gap evidence Nos. 1 through 9, 17, 23 (including paper numbers, hereinafter the same shall apply), Eul evidence Nos. 1, 2, 3, 5, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case should be revoked for the following reasons.

1) The assertion as to the acquisition value of the instant building

A) The initial construction cost of the instant building is the Plaintiff and two LeeO and two others, who newly constructed the instant building.

The amount calculated by adding 000 won to the acquisition tax and registration tax for the building of this case is 000 won, which is the actual transaction value of the building of this case. From 1995 to 2004, the Plaintiff appropriated the above KRW 000 as the asset value of the building of this case on the balance sheet prepared in relation to the rental business of the building of this case. In filing a report on global income tax, etc. with the tax authority, the Plaintiff submitted the report on the specification on the adjustment of the cost of tangible fixed assets, etc., and the tax authority imposed taxes, such as global income tax, etc. on the basis thereof. Accordingly, the actual acquisition value of the building of this case is clearly confirmed to be 00 won.

B) Meanwhile, the Plaintiff included the depreciation costs of the instant building in the necessary expenses until the time of filing a business income return in 2004, and accordingly, pursuant to Article 97(2) of the former Income Tax Act, the Plaintiff deducted the actual acquisition value of the instant building from 000 won to 0000 won from the accumulated total amount of 2004,

Won shall be the acquisition value of the building of this case.

2) Other assertion as to necessary expenses

(A) the brokerage commission;

The plaintiff paid a brokerage fee of KRW 0 million to 00,000 in connection with the transfer of this case. The above brokerage fee of KRW 0 million is corresponding to the "transfer cost" under Article 97 (1) 4 of the former Income Tax Act and should be recognized as necessary expenses.

(b) Capital expenditure;

The plaintiff paid KRW 0 million for the cost of remodeling the second floor of the building of this case into two rooms, KRW 0 million for the cost of installing electronic signboards on the rooftop of the building of this case, KRW 0 million for purchasing other fixed assets, and KRW 0 million for the cost of installing air conditioners on the building of this case through a lessee of the building of this case, and appropriated the value-added tax related to the rental business of the building of this case as the purchase of fixed assets in the report. The total amount of KRW 138.6 million is equivalent to the "capital expenditure" under Article 97 (1) 3 of the former Income Tax Act, and should be recognized as necessary expenses.

C) the amount paid to the ship'sO

The Plaintiff agreed to pay KRW 00 million to the lessee/O of the instant building as compensation for damages following the early termination of the lease agreement on the instant building. Of the agreed amount, the actual contents of KRW 0 million paid by the Plaintiff directly to OO are KRW 0 million, KRW 5 million, KRW 500,000, KRW 100,000, KRW 100,000, and the remainder of KRW 100,000,000, and KRW 00,000,000, in cash. Accordingly, it should be recognized as necessary expenses on the ground that the Plaintiff’s payment constitutes either “capital expenditure” under Article 97(1)2 of the former Income Tax Act or “transfer expense” under Article 97(1)4 of the same Act.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Determination on the assertion of acquisition value of the instant building

A) recognised facts

(1) On December 1, 1993, the Plaintiff and two non-OOO, the lessee of the instant building, agreed to settle the expenses incurred in constructing the instant building. The Plaintiff and two non-OOO et al. prepared a detailed list of the total amount paid according to the respective construction payments of the instant building and the amount to be borne by the lessor or lessee among them (hereinafter “the instant settlement table”). According to the settlement table of this case, the total expenses incurred in constructing the instant building are KRW 00,00,000,000,000,000,000, and the amount to be borne by the Plaintiff and two non-OO et al. based on the settlement table of this case. The Plaintiff and two non-OO et al. settled the lease agreement prepared as of July 15, 1993, which was executed as of July 15, 1993 pursuant to Article 4: The new building at the lease agreement is constructed as KRW 00,000,000,000.

(2) In making the final return on the tax base of income tax and special tax for rural development in 1995, the Plaintiff’s husband’s OO stated KRW 000 and KRW 000 as the depreciation asset value on the balance sheet of the building of this case in the statement of calculation of the scope of depreciation, and the depreciation amount. In addition, in making the final return on the tax base of global income tax, special tax for rural development, and resident tax for 2004, the Plaintiff entered KRW 00 and KRW 000 as the depreciation asset value on the balance sheet of the building of this case in the specification of calculation of the scope of depreciation amount, and submitted the standard balance sheet stating KRW 00 as the depreciation asset value on the balance sheet of the building of this case.

(3) Around 1995, the Plaintiff paid KRW 000 as acquisition tax and registration tax of the instant building.

[Reasons for Recognition] Facts that there is no dispute between the parties, Gap evidence Nos. 10, 16, 27 (including paper numbers), the purport of the whole pleadings

B) Relevant legal principles

In calculating necessary expenses for capital gains, where it is impossible to confirm the actual transaction value at the time of acquisition pursuant to Article 97 (1) 1 of the former Income Tax Act and Articles 163 (12) and 176-2 (3) of the former Enforcement Decree of the Income Tax Act, the acquisition value shall be calculated by applying gradually the transaction example, appraisal value, conversion value, and standard market price

In calculating gains on transfer, the actual transaction price, which is the basis for calculating gains, refers to not a general market price that reflects the objective exchange value, but the actual amount of price for the transaction itself or at the time of the transaction (see, e.g., Supreme Court Decision 2006Du7171, Apr. 26, 2007). It refers to the value objectively recognized by a sales contract or other documentary evidence. Meanwhile, even if assets value is entered in a book prepared and kept by a taxpayer, it cannot be deemed that such entry has the effect of confirming the actual acquisition value of assets, and it cannot be presumed that such entry is an actual acquisition value (see, e.g., Supreme Court Decision 87Nu536, Feb. 9, 198).

Meanwhile, according to Article 163 (1) 1 and Article 89 (1) 1 and 2 of the former Enforcement Decree of the Income Tax Act, the actual acquisition value of assets purchased by others shall be the amount calculated by adding acquisition tax, registration tax, and other incidental expenses to the purchase price, and the assets acquired by them through their manufacture, production, or construction shall be calculated as the amount corresponding to the cost for acquisition computed by calculating the sum of raw material cost, labor cost, freight, loading and unloading cost, insurance premium, public charges (including acquisition tax and registration tax) and other incidental expenses.

C) Whether the actual acquisition value of the instant building can be confirmed

In full view of the following circumstances acknowledged by adding the aforementioned evidence and the purport of the entire pleadings, it is insufficient to recognize that the actual acquisition value of the building of this case is 000 won of the book value indicated in the specifications of calculation of the scope of depreciation amount, etc. submitted by the Plaintiff, and there is no other data to calculate the actual acquisition value, and it is reasonable to deem that the actual acquisition value of the building of

(1) It cannot be presumed that the depreciation amount calculated by the Plaintiff or her husband’s OO for the final return on the tax base of income tax, etc., and the details of the balance sheet for each business year, cannot be presumed to be true. No evidence can be found that the depreciation amount prepared by the Plaintiff or OO was actually verified as to the value indicated in the calculation statement of the scope of depreciation and the balance sheet, and it is difficult to view that the amount recorded in the said book as the value of the building in question is naturally corresponding to the actual acquisition value.

(2) Although the instant settlement statement submitted by the Plaintiff to reinforce the credibility of the specifications of calculation of the scope of depreciation and the balance sheet, it is very specific that the items and amount of the settlement statement were prepared. However, it is limited to the data prepared for the purpose of calculating the second lease deposit of the instant building by the Plaintiff and EOO and two other persons, and it is difficult to deem that there is accuracy equivalent to the settlement details, etc. in the relevant contract, since the evidence of detailed items is not attached.

(3) Even if the instant settlement slip was accurately prepared, the Plaintiff asserts that the total amount of KRW 00,00, which was settled as the total expenses incurred in the construction of the instant building, was the expenses incurred in the Plaintiff’s acquisition of the instant building, under the instant settlement slip. However, since the Plaintiff agreed with OO and 2 other parties to bear only KRW 0,000,000, which is a part of the said amount, the Plaintiff’s total amount of KRW 00,000, which was not actually disbursed, cannot be deemed as the expenses incurred in the Plaintiff’

(4) Meanwhile, there is room to view that the Plaintiff actually paid the full amount to be borne by the Plaintiff in relation to the relationship with OO and 2 other than O, but it is difficult to view that the Plaintiff actually paid the full amount to the Plaintiff. However, in the lease agreement, the Plaintiff agreed to settle the lease agreement by deducting a certain monthly amount from the rent to be paid by the lessee (Article 6 of the lease agreement). It appears that the amount and payment method of the lease agreement of this case and the use of the building of this case are determined and determined. Therefore, it is difficult to evaluate the above million won as the amount of the Plaintiff actually agreed in return for the acquisition of the building of this case, such as the sale price in the sale agreement or the construction price in the contract.

(5) In addition, the total construction cost indicated in the instant settlement sheet includes KRW 000,000 and KRW 000,000,000, not yet finalized. If the above amount is deducted, it is KRW 000,000, and the amount is 000,000, which is a close close to the statement of calculation of the scope of depreciation and balance sheet, but there is a difference in specific amount. Considering that the Plaintiff is borne by the instant settlement sheet, the deduction of KRW 00,000 and KRW 00,000,000, which has not been finalized from the above settlement sheet is one million if the acquisition tax and registration tax are deducted again, and there is a difference between the above acquisition tax and registration tax and KRW 00,000,00,000,000, which are more than the above construction cost, and the acquisition tax and registration tax and KRW 00,000,000,000,000, which are merely a detailed statement and reasons for the Plaintiff’s calculation.

D) Sub-committee

Ultimately, the acquisition value of the building of this case cannot be calculated based on the actual acquisition value, and as long as there is no data to know the transaction example or appraisal value of the building of this case, the acquisition value of the building of this case is calculated based on the conversion value under Article 97(1)1 (b) of the former Income Tax Act, Articles 163(12) and 176-2(2) of the former Enforcement Decree of Income Tax Act

2) Determination on necessary expenses deduction

According to Article 97(3) of the former Income Tax Act and Article 163(3) and (6) of the former Enforcement Decree of the Income Tax Act, if the acquisition value is based on the actual transaction value, the necessary expenses that can be deducted from the calculation of gains on transfer may include the capital expenditure of the assets or the cost of lawsuit directly required for securing ownership. However, if the acquisition value is calculated based on the conversion value as the actual transaction value cannot be confirmed at the time of acquisition of assets, necessary expenses, other than the acquisition value, can only be recognized as the amount equivalent to 3% of the standard market price of real estate at the time of acquisition, i.e., the estimated deduction amount at the time of acquisition (in calculating the transfer income tax, the Plaintiff only allows the estimated deduction amount to be necessary expenses when applying the conversion value in calculating the transfer income tax amount, only the taxation guidelines based on the authoritative interpretation by the National Tax Service, but it cannot be deemed that the estimated deduction amount

As seen earlier, in the event that the Plaintiff calculates the acquisition value based on the conversion value as it is impossible to verify the actual acquisition value at the time of acquiring the instant real estate, other necessary expenses, other than the acquisition value that may be deducted in the process of calculating the transfer margin of the instant real estate, are limited to the estimated deduction amount calculated based on the standard market price as at the time of acquiring the instant real estate. As such, such necessary expenses as the Plaintiff alleged by the Plaintiff may not be deducted as necessary expenses without any need to examine whether or not the Plaintiff actually disbursed or circumstances leading up to the investigation of necessary expenses (see, e.g., evidence No. 12 (Evidence No. 18, the same as evidence No. 18), 14, 17, and 20,000 won out of the brokerage commission claimed by the Plaintiff, and it is difficult to determine that the capital expenditure of the instant real estate constitutes the capital expenditure of the instant building under the pretext of the Plaintiff’s transfer value, and it is difficult to recognize that the remainder of the capital expenditure of the instant building, which was paid by the Plaintiff to the Plaintiff as the capital expenditure of the instant building.

3. Conclusion

If so, the plaintiff's claim shall be dismissed, and the judgment of the court of first instance shall be justified in accordance with this conclusion.

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