In cases where an association member's relocation right corresponding to a expensive house deemed one house for one household and exceeds KRW 900 million is transferred, whether the object of the special long-term holding deduction for the transfer marginal profit is limited to the "transfer margin of the land or building prior to authorization of the management and disposition plan" among the transfer marginal profit of the association member's relocation right pursuant to the third universal title of Article 95 (2) of the former Income Tax Act (affirmative)

In full view of the language, structure, and legislative history and purport of Articles 89(2), 95(1) and (2) of the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015; hereinafter the same shall apply), and Article 95(2) of the former Income Tax Act (amended by Act No. 11611, Jan. 1, 2013); in cases where an association member's relocation right becomes deemed one house for one household under Article 154(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26763, Dec. 28, 2015; hereinafter the same shall apply), where the association member's relocation right becomes more than KRW 900,00,00,000,000, the subject of special deduction for long-term possession is not limited to the "long-term possession restriction rate of one house or one-half of the entire disposal plan," and the proviso to the same is not applied.

Article 95(2) of the former Income Tax Act (Amended by Act No. 11611, Jan. 1, 2013); Articles 89(2) and 95(1) and (2) of the former Income Tax Act (Amended by Act No. 13558, Dec. 15, 2015); Articles 154(1) and 155(17) of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 26763, Dec. 28, 2015);

Plaintiff (Attorney Kim Young-soo, Counsel for plaintiff-appellant)

head of Dongjak-gu Tax Office

Seoul High Court Decision 2016Nu79849 decided June 14, 2017

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

The grounds of appeal are examined.

1. Articles 95(1), 95(2), and 89(2) of the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015; hereinafter the same shall apply) provides that where a member of a rearrangement project association implementing a housing reconstruction project or a housing redevelopment project transfers any association member's relocation right acquired by authorization of a management and disposal plan under Article 48 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, an amount calculated by multiplying the gains from the transfer of the relevant assets by the deduction rate of 30/100 for each holding period shall be deducted from gains from transfer by the deduction rate of 30/100. Article 95(2) provides that the third comprehensive title (hereinafter referred to as the "instant comprehensive title provision") limits gains from the transfer of the relevant assets to the gains from transfer by the deduction rate of 80/100 for each holding period of assets falling under one house prescribed by Presidential Decree.

Article 95(2) of the Income Tax Act prior to the amendment by Act No. 11611, Jan. 1, 2013, only stipulates a special deduction rate for long-term possession differently from the main text, depending on whether the said provision constitutes one house for one household. Moreover, the scope of gains on transfer of assets is one house for one household and the case where the said provision does not apply to the scope of gains on transfer of assets. The basic structure of the said provision is the same even after the amendment of the said provision, where the association member's relocation right subject to the special deduction for long-term holding was added and the instant

In addition, in light of the fact that the special long-term holding deduction is a system prepared to deduct the increase in prices for capital gains that include the increase in prices due to price increase, the legislators seem to limit the scope of transfer margin subject to the special holding deduction prior to the approval plan for the management and disposal plan to exclude development gains from those subject to the special holding deduction for long-term holding and reconstruction among gains on transfer at the time of the enactment of the instant comprehensive holding provision, and it cannot be viewed as the association member's relocation right that is regarded as one house for one household.

In full view of the language, structure, amendment history, and purport of the relevant provisions, in cases where an association member's relocation right is deemed as one house for one household prescribed in Article 154(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26763, Dec. 28, 2015) and constitutes a expensive house exceeding KRW 900,00,00, the subject of the special long-term holding deduction is limited to "the gains on transfer of the land or building before approval of the management and disposition plan for the transfer of the association member's relocation right" among the gains on transfer of the association member's relocation right, the subject of the special long-term holding deduction under the proviso is subject to the special long-term holding deduction, and it is reasonable to view that the subject of the special long-term holding deduction does not extend to the whole gains on transfer of the association member's relocation right

2. A. The reasoning of the lower judgment and the record reveal the following facts.

(1) On November 25, 1987, the Plaintiff acquired the instant house. On August 26, 2010, the head of Seocho-gu Seoul Metropolitan Government rendered a management and disposal plan for housing reconstruction for the Seocho-gu Seoul Metropolitan Government ( Address omitted) and 66,337.7 square meters including the said house.

(2) Accordingly, the Plaintiff acquired the association member’s relocation right of this case and transferred the same amount to KRW 2.6 billion on January 20, 2015.

(3) On April 27, 2015, the Plaintiff reported and paid KRW 220,763,441 of the transfer income tax by applying the special deduction for long-term possession only for the transfer margin prior to the approval of the management and disposal plan, among the transfer margin of the entire transfer marginal profits

(4) On June 9, 2015, the Plaintiff filed a claim for correction of KRW 122,531,58 of the capital gains tax by asserting that the instant association member’s relocation right deemed the Defendant as one house for one household exceeds KRW 900 million, and that the special deduction for long-term possession should be applied to the entire transfer margin.

(5) On August 7, 2015, the Defendant rendered the instant disposition rejecting the instant disposition on the ground that “the special deduction for long-term possession does not apply to the transfer margin after the approval of the management and disposal plan of the association member’s relocation right of this case.”

B. Examining these facts in light of the legal principles as seen earlier, even if the association member's relocation right in this case is deemed one house for one household, the subject of the special long-term possession deduction is limited to transfer margin prior to the approval of the management and disposal plan in accordance with the overall title of this case, and thus, the special long-term possession deduction is not applicable to the part after the approval of the management and disposal plan. In the same purport, the lower court is justifiable to have determined the disposition in this case lawful,

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

Justices Jo Hee-de (Presiding Justice)