In a case where one side of a couple under the law has a marital relationship with a third party and the married couple is married, whether a "one house for one household", which is a requirement for exemption from capital gains tax, is a "one household" (affirmative)

In full view of the provisions of subparagraph 6 (i) of Article 5 of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) and Article 15 (1) and (2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1467 of Dec. 31, 1994), the resident, in principle, is deemed to form one household together with his spouse, and the resident, in order to form one household and require a family member to share the same livelihood at the same address or same place of residence with the resident or his spouse, unlike the resident’s spouse, in order to form one household with the resident’s spouse, the resident’s spouse constitutes one household without any restriction in addition to the resident’s spouse, and the resident’s spouse can form one household only in exceptional cases such as the case of death or divorce of his spouse. Therefore, in accordance with the strict interpretation of the provisions of tax law, the resident’s spouse is bound to form one household with the resident and the same spouse

Article 5 subparagraph 6 (i) (see current Article 89 subparagraph 3) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994); Article 15 (1) and (2) (see current Article 154 (1) and (2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467, Dec. 31, 1994)

[Plaintiff-Appellant] Plaintiff 1 et al. (Law Firm Gyeong, Attorneys Lee Jae-soo et al., Counsel for plaintiff-appellant)

Plaintiff (Law Firm LLC, Attorneys Lee Young-young et al., Counsel for plaintiff-appellant)

Head of Yongsan Tax Office

Seoul High Court Decision 97Gu15694 delivered on November 11, 1997

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the Defendant’s grounds of appeal.

Article 5 subparagraph 6 (i) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) provides that "one house for one household prescribed by the Presidential Decree (excluding the high-class housing prescribed by the Presidential Decree) and any income accruing from transfer of land attached thereto shall not be imposed." Article 15 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 14467 of Dec. 31, 1994) delegated by the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 1467 of Dec. 15, 1994) provides that "one house for one household" under Article 5 subparagraph 6 (i) of the former Income Tax Act (amended by the Presidential Decree No. 14803 of Dec. 2, 1994) provides that "a household composed of a resident and his spouse together with the same family at the same address or same place of residence shall own one house in Korea and reside for three or more years."

According to the reasoning of the judgment below, with respect to "one house for one household" as stipulated in Article 15 (1) of the former Enforcement Decree of the Income Tax Act, the court below acknowledged the facts that the plaintiff's spouse did not live together with the plaintiff at the time of transfer of the house of this case and did not live together with the plaintiff at the time of transfer of the house of this case, and determined that the plaintiff's spouse does not constitute one house for one household even if the plaintiff's spouse owned the apartment house at the time of transfer of the house of this case, as long as the plaintiff's spouse cannot be seen as a member of the same household, the plaintiff's house of this case does not constitute one house for one household.

However, in light of the above provisions, as a matter of principle, a resident is deemed to form one household together with his spouse, and as a result, in order to form a resident and a family member, the resident’s spouse needs to share the same livelihood at the same domicile or residence as the resident or his spouse, there is no restriction other than the spouse that the resident’s spouse constitutes the resident and the family member, and the resident’s spouse is able to form the household without his/her spouse only in exceptional cases, such as the death or divorce of his/her spouse. Therefore, under the principle of strict interpretation of the provisions of tax law, the resident’s spouse is bound to form the resident and the household solely

Nevertheless, the court below erred by misapprehending the legal principles on the interpretation of the above "one household" and thereby affected the conclusion of the judgment, which affected the conclusion of the judgment, which points out this issue. The ground for appeal on this point is with merit.

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Song Jin-hun (Presiding Justice)