Plaintiff (Law Firm Sejong, Attorneys Choi Gyeong-soo et al., Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

February 6, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition disposition of capital gains tax of KRW 186,721,430 against the Plaintiff on January 5, 2013 is revoked.

1. Details of disposition;

A. The deceased non-party 1 (hereinafter “the deceased”) newly constructed a multi-household house of 5 on the ground of Yongsan-gu Seoul ( Address 1 omitted), and a multi-household house of 13 on the ground ( Address 2 omitted), respectively, (hereinafter “each of the instant houses”), and commenced the housing rental business from October 16, 1994.

B. As the Deceased died on November 20, 2003, Nonparty 2, his spouse, inherited each of the deceased’s 3/9 shares, Nonparty 3, Nonparty 4, and the Plaintiff’s 2/9 shares, respectively. Nonparty 2, Nonparty 3, and the Plaintiff continued the housing rental business, and on December 8, 2010, transferred the total of 7/9 shares of each of the instant houses to Hashes, etc.

C. The Plaintiff reported the full amount of capital gains tax of 310,40,524 to be reduced or exempted on the ground that the period of lease of each of the instant houses and the period of lease leased by the Plaintiff after inheritance exceeds 10 years. However, on January 5, 2013, the Defendant reported the full amount of capital gains tax of 310,40,524 under the Restriction of Special Taxation Act, on the basis that the provision on capital gains tax reduction or exemption under the Restriction of Special Taxation Act is applied. However, on January 5, 2013, the Plaintiff is a resident who leases 5 or more houses to be subject to the pertinent provision. The Plaintiff’s number of houses converted to the inheritance rate of 2/9 out of each of the instant houses is merely 4 (18 x 2/9) and thus, the said requirements are less than the number converted to the inheritance rate of 50% only for the period of lease of the Deceased, and thus, issued

D. On February 9, 2013, the Plaintiff filed an appeal for adjudication against the Plaintiff, but received a decision of dismissal from the Tax Tribunal on August 12, 2013.

[Ground of recognition] The fact that there is no dispute, Gap evidence 1 through 7 (including paper numbers), the purport of whole pleading

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Under the Enforcement Decree of the Income Tax Act, joint owners of a house shall be deemed to own their own house, and in cases where a house other than a house jointly inherited for one household is transferred with respect to the application of a house, the house jointly inherited shall not be deemed to be a house of the resident. Therefore, a reduced interpretation of capital gains tax reduction or exemption provisions prescribed by the Restriction of Special Taxation Act by converting the number of rental houses at the ratio of inheritance shares by converting the number of rental houses at the ratio of inheritance shares, even though there is no express provision on the calculation of the number of rental houses due to inheritance under the Restriction of Special Taxation Act, is in violation of the Enforcement Decree of the Income Tax Act, the legislative intent

B. Determination

(1) Relevant statutes

Article 97 of the Restriction of Special Taxation Act provides that where a resident prescribed by the Presidential Decree transfers a newly built house during the period from January 1, 1986 to December 31, 200 after the commencement of a lease on or before December 31, 200, the tax amount equivalent to 50/100 of the capital gains tax on the income accruing from the transfer of the rental house shall be reduced or exempted, but where the rental house is leased for not less than 10 years, the capital gains tax shall be exempted. Article 97 (1) of the Enforcement Decree of the Restriction of Special Taxation Act provides that the term "resident prescribed by the Presidential Decree" means a resident who leases not less than 5 rental houses, and Article 97 (1) of the Enforcement Decree provides that the term of lease for the rental house means the date when the house is leased, that is, the initial date in reckoning the house lease period of a decedent shall be added to the house lease period of a decedent, and where an heir acquires a rental house due to inheritance of a decedent, the period of lease shall not be regarded as a house lease period.

(2) Determination

In light of the principle of no taxation without law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws is to be interpreted in accordance with the text of the law, barring special circumstances, and it is not allowed to expand or analogically interpret without reasonable grounds, and in particular, it accords with the principle of fair taxation to strictly interpret that the provision is clearly preferential in terms of the requirements for tax exemption or exemption (see Supreme Court Decision 2002Du9537, Jan. 24, 2003, etc.).

However, Article 97 of the Restriction of Special Taxation Act and Article 97 of the Enforcement Decree of the same Act stipulate that capital gains tax on long-term rental houses shall be subject to five or more lessees, and there is no provision regarding the number of rental houses. ① An inheritor shall succeed to the comprehensive rights and obligations on the property of the inheritee from the time of commencement of inheritance. If there are several inheritors, inherited property shall be jointly owned, and coinheritors shall succeed to the rights and obligations of the inheritee in proportion to their respective shares. As such, the Plaintiff is in the position of succession only to 2/9 shares of inheritance among each of the instant houses after the deceased’s death, and the calculation of capital gains tax on each of the instant houses shall be made with respect to the above shares. ② Article 154-2(b) of the Enforcement Decree of the Income Tax Act provides for the detailed requirements for housing transfer income tax exemption in light of the structure or content of the provision, which the Plaintiff claims, and it is not in violation of the principle of statutory reduction or exemption or interpretation of capital gains tax on transfer income tax by inheritance or inheritance.

3. Conclusion

The plaintiff's claim is dismissed for lack of reason.

Judges Noh Jeong-Gyeong