The propriety of the disposition that calculated the acquisition value of the inherited land based on the standard market price.

In case of calculating gains on transfer based on the actual transaction price, the acquisition price of the land inherited or donated shall be in principle the market price, but if it is difficult to calculate the market price, it is reasonable to regard the value appraised

Necessary expenses for transfer assets under Article 163 (9) of the Enforcement Decree of the Income Tax Act

Article 60 of the Inheritance Tax and Gift Tax Act: Principle of Appraisal

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

The Defendant’s imposition of capital gains tax of KRW 14,648,180 against the Plaintiff on July 9, 2007 shall be revoked.

1. Details of the disposition;

A. On October 19, 2005, the Plaintiff acquired 1/4 shares out of 1/4 shares of 0,000 square meters of 826 square meters of 1/4 shares of 469-3 response, which are the same as 1,845 square meters of 469-3 shares of 0,000 square meters in Chungcheongnam-do, ○○-do, ○○○-do, ○○○○-do, by inheritance (hereinafter “each real estate of this case”). On November 10, 2006, the Plaintiff transferred KRW 90,000 to ○○○○○○ on November 10, 2006. Each real estate of this case where each real estate of this case is located is a designated area under Article 104-2 of the former Income Tax Act (amended by Act No. 8852, Feb. 29, 2008). Therefore, gains from transfer should be calculated as a real transaction value.

B. On May 31, 2007, the Plaintiff filed a final return on capital gains tax with the actual transaction value as transfer value, and reported the acquisition value of each of the instant real estate to be deducted as necessary expenses at KRW 67,50,000, which is calculated by the conversion value under Article 97(1)1(c) of the Income Tax Act and Article 176-2(2)2 of the Enforcement Decree of the Income Tax Act.

C. However, the Defendant, pursuant to Article 163(9) of the Decree on the New Promotion of Income Tax Act, deemed the acquisition value of each real estate of this case as KRW 12,019,500 calculated by the officially announced value as at the time of commencing the inheritance, and issued a revised and imposed capital gains tax for the year 2006 to the Plaintiff on July 9, 2007 (hereinafter the instant disposition) as KRW 14,648,180.

[Ground of recognition] Unsatisfy, Eul evidence 1 to 4 (including each number), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) Where the actual transaction value at the time of acquiring land in an area designated as speculation is unknown, the acquisition value of assets inherited from the transfer value to the necessary expense to be deducted shall be calculated by the transaction example value, appraisal value or conversion value as provided in Article 97 (1) 1 (c) of the Income Tax Act, and thus, the plaintiff's report is justifiable in the calculation of the tax base and tax amount

② The Defendant’s method prescribed under Article 163(9) of the Enforcement Decree of the Income Tax Act (hereinafter “instant provision”) that is based on the basis provision does not have any specific ground for delegation to the mother law, and, in the case of an asset acquired by inheritance, the actual market price at the time of acquisition has decreased. As such, the instant provision infringes on the property rights of the people and is null and void against the principle of excessive prohibition, and the instant disposition based thereon is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) A deviation from the limitation of delegated legislation

(A) According to Articles 94(1), 96(1), 97(1)1(a)(proviso) and (c) of the Income Tax Act, in the case of land within an area where the transferred asset is speculatively designated, the transfer value and the acquisition value shall be calculated based on the actual transaction value. In this case, when it is impossible to confirm the actual transaction value at the time of acquisition, the acquisition value may be calculated by applying the transaction example value, appraisal value or conversion value as prescribed by the Presidential Decree in sequential order. Meanwhile, Article 97(5) of the Income Tax Act provides that “the necessary matters concerning the calculation of necessary expenses such as the scope of the actual transaction value required for acquisition and the calculation of the gift tax amount shall be determined by the Presidential Decree.” In applying the proviso of Article 97(1)1(a) of the Income Tax Act to the inherited or donated assets, the amount appraised pursuant to the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax

(B) In light of the purport of the above provisions, in a case where the assets other than the assets inherited or donated are calculated based on the actual transaction value pursuant to the proviso of Article 97 (1) 1 (a) of the Income Tax Act, and where it is impossible to confirm the actual transaction value required for such acquisition, the transfer value may be calculated based on the transaction example, appraisal value, or conversion value as prescribed by the Presidential Decree. However, in a case where the transfer gains should be calculated based on the actual transaction value pursuant to the proviso of Article 97 (1) 1 (a) of the Income Tax Act as the assets inherited or donated, there is no room for existence at the time of acquisition, and thus, separate provisions on the actual transaction value at the time of acquisition need to be established. Accordingly, in a case of the assets inherited or donated under the provision of this case, the value assessed pursuant to Articles 60 through 66 of the Inheritance Tax

(C) Therefore, this case’s provision provides for necessary matters concerning the calculation of necessary expenses such as “the scope of actual transaction price required for acquisition” under Article 97(5) of the Income Tax Act, which is delegated by the mother’s law so that it can be prescribed by the Presidential Decree, and thus, cannot be deemed as an invalid provision without delegation of the parent’s law. In addition, where assets inherited or donated are transferred, the amount corresponding to the tax base of inheritance tax or gift tax (value assessed under Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencement of inheritance or donation) may be recognized as necessary expenses of the relevant assets when calculating gains from transfer, and the imposition of capital gains tax may prevent tax evasion or double taxation only when the transfer value exceeds the above value (see, e.g., Supreme Court Decision 2006Du1326, Oct. 26, 2007).

(2) Whether the property right has been infringed

In addition, according to the Inheritance Tax and Gift Tax Act, the value of property falling under the tax base of inheritance tax or gift tax is, in principle, based on the market price, and where the market price is verified at the time of imposition of the inheritance tax or gift tax and thus, if the inheritance tax or gift tax is imposed on the basis of the market price, necessary expenses may be deducted from the imposition of the transfer income tax. However, if a favorable tax amount is imposed on the basis of the standard market price on the ground that it is difficult to calculate the market price at the time of imposition of the inheritance tax or gift tax, even if necessary expenses recognized as more than the case based on the market price based on the standard market price are calculated on the basis of the standard market price, and thus, even if the transfer income tax burden is somewhat increased on the basis of the standard market

(3) The instant disposition is lawful, and the Plaintiff’s assertion disputing this is without merit.

3. Conclusion

The plaintiff's claim is dismissed on the ground that it is without merit.

Related Acts and subordinate statutes

Article 94 of the former Income Tax Act (amended by Act No. 9144 of Dec. 30, 2006) Scope of transfer income

(1) Transfer income shall be the following incomes generated in the current year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

Article 96 of the Income Tax Act

(1) The transfer value of assets pursuant to the subparagraphs of Article 94 (1) shall be the actual transaction value between the transferor and transferee at the time of transfer of the relevant assets (hereinafter referred to as “actual transaction value”).

(2) Notwithstanding the provisions of paragraph (1), where assets under the provisions of Article 94 (1) 1 and 2 are transferred not later than December 31, 2006, the transfer value of such assets shall be based on the standard market value at the time of the transfer of relevant assets except for the cases falling under any of the following subparagraphs:

7. Where the assets are real estates located within the designated area under the provisions of Article 104-2 (2);

Article 97 (Calculation of Necessary Expenses for Capital Gains)

(1) In the calculation of gains on transfer of a resident, the necessary expenses to be deducted from the transfer value shall be as follows:

1. Acquisition value:

(a) The actual transaction price required for the acquisition of assets under subparagraphs of Article 94 (1): Provided, That in cases falling under the main sentence of Article 96 (2), the standard market price at the time of acquisition of the relevant assets;

(b) In cases falling under the main sentence of item (a), where it is possible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value;

(5) Matters necessary for calculation of necessary expenses, such as the scope of actual transaction price required for acquisition and gift tax amount shall be prescribed by Presidential Decree.

Operation of the designated area under Article 104-2 of the former Income Tax Act (amended by Act No. 8852 of Feb. 29, 2008)

(1) Where the rate of increase of real estate prices in the relevant region is higher than the national consumer price inflation rate, and the price of real estate in the relevant region sharply rise or is likely to rise rapidly, the Minister of Finance and Economy may designate it as a designated area according to the standards and methods

(2) The term "real estate within the designated area" in Articles 96 (2) 7 and 104 (4) 1 and 2 means the real estate prescribed by the Presidential Decree from among the real estate located within the designated area under the provisions of paragraph (1).

Article 163 of the Enforcement Decree of the Income Tax Act

(1) The term “actual transaction price required for acquisition” in the main sentence of Article 97 (1) 1 (a) of the Act means the total of the following amounts:

1. Values correspond to the cost for acquisition computed by applying mutatis mutandisArticle 89 (1) (including the discounted debt estimated by the present value under Article 89 (2) 1, but excluding the amount exceeding the market price under the unfair act and calculation);

2. The amount of the litigation expenses, reconciliation expenses, etc. directly required for securing the ownership of the assets for which the acquisition litigation is concerned, excluding those included in the necessary expenses in calculating the income amount of each year paid;

3. In applying subparagraph 1, where the transaction price is determined by adding the amount corresponding to the cost for acquisition under an agreement between the parties concerned, the relevant amount equivalent to the interest shall not be included in the cost for acquisition;

(9) In applying the provisions of the text of Article 97 (1) 1 (a) of the Act to the assets received by inheritance or donation (excluding the donations under the provisions of Articles 33 through 42 of the Inheritance Tax and Gift Tax Act), the value appraised under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or of donation shall be considered as the actual transaction value at

(12) For the purpose of Article 114 (5) of the Act, the term “business example value, appraisal value or conversion value as prescribed by the Presidential Decree” means the value according to the wj as provided in Article 176-2 (2) through (4)

Determination and decision of Article 176-2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618 of Feb. 22, 2008)

(2) The term “acquisition price converted by the method prescribed by the Presidential Decree” in Article 114 (5) of the Act means the acquisition price converted by the method in the following subparagraphs:

2. In cases of the rights to acquire the land, buildings and real estate under Article 96 (1) and (2) 1 through 9 of the Act (the provisions of subparagraph 6 shall apply only to the assets acquired before a fictitious acquisition date under paragraph (4)), the amount calculated by the following formula:

The actual transaction price at the time of transfer, transaction example under paragraph (3) 1, or standard market price at the time of acquisition.

X------------------------

Standard market price at the time of transfer (in the case of Article 164 (8), the standard market price at the time of transfer under the same paragraph)

Inheritance Tax and Gift Tax Act

Article 60 Principles, etc. of Appraisal

(1) The value of property on which inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "base date of appraisal"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (

(3) In the application of paragraph (1), where it is difficult to compute the market price, the value assessed by the methods prescribed in Articles 61 through 65 in consideration of the kind, scale, transaction status, etc. of the relevant property.

Article 61 Appraisal of Real Estate, etc.

(1) Real estate shall be appraised by the following methods:

1. Land:

The officially assessed individual land price under the Public Notice of Values and Appraisal of Real Estate Act (hereinafter referred to as the "officially assessed individual land price"): Provided, That the value of the land without the publicly assessed individual land price, shall be the amount appraised by the superintendent of the competent tax office by the method prescribed by the Presidential Decree, taking into consideration the individual publicly notified persons causing the neighboring similar land, and with respect to the land in the area prescribed by the