Method of dividing the reasonable value of land and buildings into the value thereof;

Where it is unclear that the value of land and a building is not divided into the value of the land and a building, not the case where the land and a building are transferred without distinguishing the value thereof, but the value of the land and the building are clearly divided under the contract, including the case where it is not determined by the genuine agreement between the parties concerned, or it is not deemed to be a division of

The contents of the judgment are the same as attachment.

Article 100 (2) of the former Income Tax Act

2018Gudan8171 Revocation of Disposition of Imposing Capital Gains Tax

*

Head of Si Tax Office

April 26, 2019

May 17, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Defendant’s transfer income tax amounting to KRW 281,409,130 for the Plaintiff on December 1, 2016 (additional Tax) of the year 2015.

(including) revoke the disposition of imposition.

1. Details of the disposition;

A. On April 10, 2015, the Plaintiff entered into a sales contract with Nonparty Ba-dong, Sincheon-dong, Sincheon-si, the Plaintiff owned ****-* a stock farm site 1,608 square meters (hereinafter referred to as “instant land”) and the Plaintiff entered into a sales contract with the Plaintiff on September 1, 1997 in the aggregate of 1.13,00 million square meters for livestock pens, 288.6 square meters for livestock pens, 210 square meters for livestock pens, 210.6 square meters for composts, and 90 square meters for composts (hereinafter referred to as “the instant building”). The Plaintiff entered into a sales contract with the purport that the remainder of the instant building was calculated as KRW 15,100,000,000,000 for real estate under the name of the Plaintiff 2.15 million for each of the instant sales contract and the instant housing sales contract (hereinafter referred to as KRW 215,00,000 for each of the instant building).

B. On May 26, 2015, the Plaintiff applied the provision on capital gains tax reduction or exemption as to the place of stable use under Article 69-2 of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015; hereinafter the same shall apply) to the Defendant regarding the transfer of each of the above real estate. Of the transfer price of the instant land and the building KRW 1.13 million, the value of the instant land is KRW 593,429,730 (the amount calculated as KRW 1.20,00 per square day according to the special agreement under the above sales contract), the value of the instant building is divided into KRW 536,570,270, and the conversion acquisition value is divided into KRW 38,592,00, KRW 349,102,966, KRW 164,937,991, capital gains tax is assessed and reduced or exempted.

C. The Defendant conducted an investigation into capital gains tax on the Plaintiff from August 19, 2016 to September 8, 2016: (a) deemed that the Plaintiff did not meet the requirements for reduction or exemption under Article 69-2 of the former Restriction of Special Taxation Act at the time of transfer, and denied the reduction or exemption of capital gains tax on the land used for stable use; (b) calculated the tax base and tax amount by calculating the tax base and tax amount by calculating the value of the land and buildings according to the standard market price at the time of transfer; and (c) it is confirmed that the Plaintiff continued to lease the instant building since the new construction in 197, 410 square meters of land attached to the leased building among the instant land and the number of livestock raised in excess of 468.75 square meters of land for non-business use; and (b) notified the Plaintiff of the amount of capital gains tax reverted to the Plaintiff in September 12, 2016.

D. On October 19, 2016, the Plaintiff appealed and filed a request for pre-assessment review on October 19, 2016. On December 1, 2016, the Defendant issued a disposition to correct and notify the Plaintiff of capital gains tax of KRW 340,084,730 (including additional tax) that reverts to the year 2015 (hereinafter “instant disposition”).

E. On February 14, 2017, the Plaintiff dissatisfied with the instant disposition, filed an objection with the Commissioner of the Central Regional Tax Office, and on April 21, 2017, the Deputy Director of the Central District Tax Office rendered a decision to reduce the amount of KRW 58,675,600 out of the Defendant’s amount imposed (i.e., the remaining amount of the instant disposition, including KRW 281,40,084,730-5,675,600, and penalty tax) by regarding the entire land of this case as the land for business use on April 21, 2017.

F. On June 23, 2017, the Plaintiff appealed, but the Tax Tribunal dismissed the Plaintiff’s request on June 28, 2018.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, 16, 17, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

1) As to the classification of land and building value

Article 100 of the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015; hereinafter the same) provides that the transfer margin shall be calculated based on the actual transaction price and, in cases where land, buildings, etc. are transferred together, it shall be calculated based on the standard market price at the time of acquisition or transfer when the distinction between the value of the land, buildings, etc. is unclear, while the sale price of the land, buildings, etc. in this case shall be calculated based on the standard market price at the time of acquisition or transfer, in cases where the distinction between the value of the land, buildings, etc. is unclear. The sale price of the land, etc. in this case shall be calculated as KRW 1.13,00,000 on the matters of a sales contract concerning the land, buildings, etc. in this case, stating that the remaining sale price is settled at the price of the building in this case, and the actual transfer price between the parties to the sale and purchase is also settled. Thus, the transfer price of the land

2) As to the reduction of capital gains tax

From 1986 to 2015, the Plaintiff continued to engage in the agriculture and the livestock industry continuously from the date of the transfer of the instant land and the building to the date of the transfer. In particular, after the construction of the instant building in 1997, the Plaintiff engaged in the livestock industry only, and transferred the instant land used directly for livestock industry for at least eight years to discontinue the business, so it is illegal for the Defendant to deny the reduction of capital gains tax and to take the instant disposition.

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination

1) Claims on the classification of land and building value

According to Article 100(2) of the former Income Tax Act, Article 166(6) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016); and Article 64 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 27472, Aug. 31, 2016), where land and buildings are transferred along with each other, and the transfer value is calculated based on the actual transaction value, if the classification of the value of land and buildings is unclear, it shall be calculated in proportion to the value calculated according to the standard market price, etc. at the time of transfer. Here, the term “when the classification of the value of land and buildings is unclear” means not the case where the value of land and buildings is not the case where the land and buildings are transferred without the division, but it shall be interpreted that the said value of land and buildings is clearly distinguishable from the real agreement between the parties

With respect to the instant case, the following facts are shown in the item column of the special agreement on the sales contract (No. 2 No. 1) for the land and building of this case. However, considering the following various circumstances, it cannot be seen that the value classification of the instant land and building is a reasonable price by deviating from ordinary transaction practices. Thus, in light of the above legal principles, it is deemed that the instant land and building is not clear that the value classification is made. Therefore, the Defendant’s determination of the transfer value of the instant land and building in accordance with the standard market price at the time of each transfer of the instant land and building is lawful. This part of the Plaintiff’s assertion is not acceptable [the Plaintiff’s assertion is without merit since Article 100(3) of the current Income Tax Act, which was enforced only after the instant land and building are transferred (where there is a difference between the value of the land and building, it shall be deemed as the time when the classification of the value of the land and building is unclear), and thus, the Defendant’s assertion that the transfer value of the instant land and building is retroactively applied pursuant to the above legal principles.

① The standard market price of the instant land and the instant building is KRW 923,200,00 in total. Among them, the standard market price of the instant land is KRW 795,477,00 (86.1%) and the standard market price of the instant building is KRW 127,726,00 (13.9%) (No. 17-2). However, the value reported by the Plaintiff pursuant to the special terms and conditions set forth in the sales contract of the instant land and the instant building is KRW 593,429,00 (52.5%) among total KRW 1.13,130,000 (52.5%) and approximately KRW 536,570,00 (47.5%) compared to the standard market price of the instant building, and the value of the instant building reported by the Plaintiff is lower than that of the Plaintiff’s building at a reasonable level than 4.20% compared to the standard market price.

② In general, the value of the building is to be continuously decreased due to the passage of time after its new construction. The building of this case was newly constructed in 1997 and was old or deteriorated for at least 17 years at the time of its transfer.

③ The witness distribution* testified that the instant building was reinforced and the building condition was good and the purchase was made by dividing the above values as above. However, the witness testimony is difficult to believe the above witness's testimony in light of the following: (i) the circumstances in this paragraph and the 1.13 billion won of the total sales value of the instant land and building as the acquisition value of the instant land in full in the standard financial condition table (Evidence No. 4) for the business year 2015 of 1,2) and 2015 of the 2015.

2) Claim on reduction or exemption of capital gains tax

Article 69-2 (1) of the former Restriction of Special Taxation Act provides that capital gains tax shall be reduced or exempted in cases where a resident residing in a place where a livestock shed is located transfers a stable used directly for the livestock industry for not less than eight years in order to discontinue the business. As to the fact that the said livestock shed was used directly for the livestock industry for not less than eight years, the transferor who asserts the reduction or exemption of capital gains tax under the said provision is responsible for proving that the said livestock shed was used directly for the livestock industry. In light of the following facts and circumstances, it is insufficient to acknowledge that the Plaintiff used the land of this case for “direct livestock industry for not less than eight years” only with the evidence submitted by the Plaintiff in this case, in light of the overall purport of arguments and the following facts and circumstances:

①*** The livestock shed period and the certificate of closure of a livestock shed on the instant land and building issued by the mayor are indicated as the period used directly for the livestock farming from May 8, 2010 to September 10, 2015 as the total of five years and four months. The Plaintiff registered the livestock farming business (livestock breeding business) with the location of the instant land as its location is also May 18, 2010.

② From 2009 to 2015, the purchase details of mixed feed purchased by the Plaintiff are as follows. Even if so, the Plaintiff appears to have been engaged in livestock farming business in full-time since 2010 when the Plaintiff registered the livestock business.

③ As to the instant building, the Plaintiff registered as a rental business operator on January 1, 1998 with respect to the instant building as its opening date, and continued to engage in the leasing business until May 29, 2015, and accordingly, the Plaintiff also reported value-added tax thereon. Specific Plaintiff’s lease status of the instant building is as follows. In particular, by 2009, the Plaintiff had consistently leased a considerable portion of the instant building to the lessee for the use of the factory until 2009, which was one year prior to the registration of livestock farming business.

④ At around 200, the Plaintiff and head of the Gu,**, salt* et al. filed a lawsuit against brin** (U.S. District Court**), the Plaintiff and head of the Gu*, salt* as the cause of the claim in the lawsuit, the head of the instant building owned by the Plaintiff*** * one Dong (28mm2) from among the instant building owned by the Plaintiff, salt* * one Dong (28m28m2) from among the instant building owned by the Plaintiff, and one Dong (210m2) from the livestock shed respectively. In light of this, even if the instant land was used for livestock farming before 2010, it seems difficult to conclude that the Plaintiff was engaged in the livestock farming business.

3. Conclusion

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