Early High Court Decision 201J 1512 (Law No. 207. 20)

Where it is impossible to confirm the actual transaction price as a simple exchange, it shall be applicable.

In concluding an exchange contract, since the transaction example, appraisal value, etc. is not only the procedure of market price appraisal but also the value of the exchange object is not separately determined, it is not possible to confirm the actual transaction value.

Article 97 of the Income Tax Act

2011Gudan2680 Revocation of Disposition of Imposing capital gains tax

Maximum XX

Head of Namyang District Tax Office

August 13, 2012

September 3, 2012

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 000 for the year 2007 against the Plaintiff on January 10, 201 shall be revoked.

1. Details of the disposition;

A. On June 3, 2003, the Plaintiff and the formerA made an agreement with the Plaintiff on June 3, 2003 to transfer to the Plaintiff the land and the building on that land (hereinafter referred to as the “instant commercial building”) located in Y 000-12 in Ansan-si, Ansan-si, and the formerA entered into an exchange agreement with the Plaintiff, instead of the Gyeonggi-gun, to transfer the land on the other five parcels of land (hereinafter referred to as the “instant land”). In concluding the exchange agreement with the Plaintiff (hereinafter referred to as the “instant exchange agreement”), the formerA agreed to take over the obligation of 00 won to return the rental deposit obligation of the instant commercial building and pay 00 won of exchange gains to the Plaintiff.

B. Under the instant exchange contract, the Plaintiff transferred the instant commercial building to KimB, the spouse of the formerA, on June 5, 2003, and acquired the instant land from the formerA on June 11, 2003.

C. On June 4, 2007, the Plaintiff transferred the instant land to KRW 000, and on June 29, 2007, the Plaintiff reported each transfer income tax by calculating the acquisition value of the instant land to KRW 000, and the transfer value to KRW 000.

D. Accordingly, according to the instant exchange contract, the Defendant: (a) deemed that the Plaintiff voluntarily appropriated the acquisition value of the instant land in excess of 000 won and thus under-reported capital gains tax; and (b) subsequently, on January 10, 201, issued a correction and notification of KRW 000 of capital gains tax for the transfer income tax of 2007 to the Plaintiff (hereinafter “instant disposition”).

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on April 11, 201, but the Tax Tribunal dismissed the Plaintiff’s appeal on July 20, 201.

[Ground of recognition] Facts without dispute, Gap evidence 1, 4, Eul evidence 1, Eul evidence 3-1, Eul evidence 3-1, the purport of whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

The acquisition value of the instant land was reported as KRW 000, taking into account at least the rise in land prices and the cost during the retention period of the instant land, and the said value is not significantly different from the actual transaction value. Therefore, the instant disposition was unlawful on the premise that the acquisition value of the instant land is KRW 00,000.

(2) The defendant's assertion

The Plaintiff transferred the instant commercial building to KimB, and Jeon-A, his husband, transferred the instant land to the Plaintiff. The value of the instant commercial building is KRW 000,000, and the value of the instant land is KRW 000,000, respectively. Since Jeon-A agreed to take over the obligation of KRW 000,000, and to pay the remaining difference in cash to the Plaintiff, the instant disposition that calculated the acquisition value of the instant land as KRW 00,000, is lawful.

(b) relevant statutes;

It is as shown in the attached Form.

C. Determination

(1) As to whether the actual transaction price of the instant land can be confirmed

The actual transfer value of the relevant asset, which serves as the basis for calculating the amount of capital gains tax, refers to the value that the transferor transfers the asset at the time of the transaction and received as a price for the transfer and is objectively recognized by the sales contract or other documentary evidence. Thus, in case of the exchange of the asset, it shall be a value exchange based on the value of the object, especially on the basis of the value of the asset, and in case of the exchange of the transaction accompanied by the procedure for settlement of the difference in the appraisal value, the actual transfer value may be confirmed, but in case of a simple exchange of the value, the actual transfer value shall not be confirmed (see, e.g., Supreme Court Decision 2003Du14123, Mar. 26, 2004). The same applies to the case where the parties to the exchange contract arbitrarily assess and determine the value of the object to be exchanged and then calculate the difference (see, e.g., Supreme Court Decision 2010Du27592

On the other hand, as seen earlier, the Plaintiff and Jeon Dong concluded the instant exchange contract with the purport that the Plaintiff did not undergo the procedures such as appraising the market price of the instant commercial building and the instant land, and that the Plaintiff transferred the instant commercial building to the Plaintiff without separately setting the respective values of the instant commercial building and the instant land, and the Plaintiff shall transfer the instant land to the Plaintiff, but the Jeon Dong concluded the instant exchange contract with the purport that the Plaintiff shall take over the obligation of 000 won to return the deposit deposit deposit obligation of the instant commercial building and pay 000 won to the Plaintiff. As such, the instant exchange is not a mere exchange, but a mere exchange is not a case where the actual transaction value of the instant land can be confirmed, and there is no other data to confirm the actual transaction value of the instant land. Accordingly, the instant disposition is unlawful by calculating the acquisition value of the instant land as KRW 00 on the premise that the acquisition value of the instant land can be confirmed under the instant exchange contract.

(2) Calculation of a reasonable amount of tax

In a lawsuit seeking a revocation of a taxation disposition, the determination of illegality of the said taxation disposition is determined by whether the amount of the tax assessed exceeds a legitimate tax amount (see, e.g., Supreme Court Decisions 81Nu296, May 11, 1982; 98Du4993, Sept. 3, 1999). Therefore, even in cases where the tax authority erred in the course of calculating and determining the tax base and tax amount, and thus, even in cases where the taxation disposition is unlawful, if the tax amount imposed and notified as above does not exceed the legitimate amount of tax calculated, and the erroneous method does not vary in the scope of the taxable unit and the reason for the disposition, it does not constitute an imposition and notice within the scope of a legitimate tax amount, and thus, it does not constitute an unlawful disposition, and thus, it does not be revoked (see, e.g., Supreme Court Decisions 91Nu10695, Jul. 28, 192; 92Nu10180, Sept. 28, 1993).

As to the instant case, there is no evidence to verify the actual transaction price (acquisition value) and sale price of the instant land, so the acquisition price of the instant land is bound to be based on the conversion price, and if the transfer income tax is calculated by calculating the acquisition price of the instant land as the conversion price, it is identical to the description in the attached Form, “the details of calculating the transfer income tax of the Plaintiff LCC” (total determined tax amount). The transfer income tax amount of the instant disposition taken under the premise that the acquisition price of the instant land is 000 won (total determined tax amount - total tax amount - total tax amount 000 won). Thus, it is apparent that the transfer income tax amount of the instant disposition does not exceed the legitimate transfer income tax amount calculated by calculating the acquisition price of the instant land as the conversion price of the instant land. Accordingly, even though the actual transaction price was not verified in calculating the acquisition price of the instant land, the disposition in this case was made under the premise that the actual transaction price was not verified, so long as the Plaintiff’s tax amount notified to the Plaintiff does not exceed the legitimate scope, it cannot be revoked.

3. Conclusion

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