The fact that there is no evidence to regard it as the execution of security for transfer, and if the real acquisition value is not verifiable, it may be made as the conversion value.

It is insufficient to prove that the transfer of a taxable asset is the transfer of the taxable asset because it is insufficient to prove that the transfer is the execution of the transfer for security, and if the real acquisition value is not verifiable, the conversion value

Articles 88 and 97 of the Income Tax Act

2017Gudan81628 Revocation of Disposition of Imposing capital gains tax

○ ○

○ Head of tax office

on 15, 2018

on July 27, 2018

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 262,289,980 (including additional tax) for the Plaintiff on December 1, 2016 shall be revoked.

1. Details of the disposition;

A. (1) On June 29, 2001, the Plaintiff acquired 24,969 shares out of 23,617 square meters of 00 ○○-ri 18-4 forest land from AA to 00 ○○-si 00,000,000.

2) On September 10, 202, the above ○○-ri 18-4 Forest land 23,617 square meters were divided into 18-4 forest land and 23,452 square meters of forest land and 18-11 forest land of the same Ri, and the above ○○-ri 18-11 forest land was converted into a road on the same day. The said ○○-ri 18-11 forest land was converted into a road; the said ○○-ri 18-4 forest land and 23,452 square meters was converted into a miscellaneous land on February 24, 2003.

B. On November 2, 2015, the Plaintiff completed the registration of ownership transfer with respect to the shares of 4,969/24,178 (hereinafter “the shares of the instant one”) among the shares of 18-4,452 square meters (hereinafter “the instant one parcel of land”) and the shares of 4,969/178/178 (hereinafter “the instant two parcels of land”) among the shares of 18-11,000 square meters of 165 square meters of 24,178 (hereinafter “the instant two parcels of land”) on November 2, 2015 (hereinafter “the instant transfer”), and completed the registration of ownership transfer with respect to the shares of each of the instant parcels of land as KRW 825,00,000,000, and other necessary expenses as KRW 356,536,60,606, Oct. 36, 200; and thereafter made a preliminary return with respect to the transfer value as KRW 16360,201.

C. From August 11, 2016 to September 20, 2016, the Defendant conducted a tax investigation with respect to the Plaintiff, and subsequently denied the acquisition value reported by the Plaintiff on the grounds that the actual acquisition value of each of the instant land shares cannot be verified, and recognized the acquisition value as necessary expenses pursuant to Articles 97(2)2 and 114(2) and (4) of the former Income Tax Act (Amended by Act No. 14389, Dec. 20, 2016; hereinafter the same) and revised and notified the Plaintiff of KRW 262,289,980 (including additional tax) for the Plaintiff on December 1, 2016 (hereinafter referred to as “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed a request for examination on February 27, 2017, but the Commissioner of the National Tax Service dismissed the Plaintiff’s request for examination on September 15, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1-1, 2, Gap evidence 3, 6, 7, Eul evidence 1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff completed the registration of transfer of ownership with respect to each of the instant land shares to BB is completed through the execution of the transfer of security for the loan obligation of KRW 400,00,000, which the Plaintiff had borne to BB at the time. The instant transfer does not constitute the transfer of assets subject to the transfer of capital gains tax. The instant disposition made on a different premise is unlawful.

2) Even if the Plaintiff’s sale of shares in each of the instant land to BB, the Plaintiff’s actual payment of KRW 367,00,000 as the purchase price at the time of acquiring 4,969 shares in 23,617 square meters of 0,000 ○○○○-si 18-4,617 square meters of forest land on June 29, 201, is unlawful, even if it was deemed that the Plaintiff actually paid KRW 367,00,000 of the purchase price.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) As to the transfer of security

A) The transfer of ownership of assets for the purpose of securing debt cannot be deemed the transfer of assets subject to capital gains tax (see, e.g., Supreme Court Decision 83Nu120, May 24, 1983).

B) In addition to the whole purport of the pleadings, the following facts can be acknowledged in each entry of evidence Nos. 1-1, 2, 2, 2, 3, 8, and 10 through 17.

① On September 3, 2014, the Plaintiff issued to BB a promissory note with a face value of KRW 400,000,000, and payment period as of February 2, 2015. On the same day, the Plaintiff completed the registration of creation of a neighboring mortgage with respect to the share of the land of this case as of the maximum debt amount of KRW 520,00,000,000, the debtor, the Plaintiff, and the mortgagee BB. On July 8, 2015, BB made an application for voluntary auction commencement (Uwon District Court Decision 000,000) with respect to the share of land of this case as of July 9, 2015.

② On October 31, 2015, the Plaintiff and BB drafted a “written confirmation of the sale of real estate” (hereinafter “instant confirmation”) with the following content.

The plaintiff shall sell and transfer '○○○○-si ○○○○-si 18-4 other than all the plaintiff's equity interest to BB at KRW 800,000 per square year, and all the transfer expenses shall be borne by the plaintiff.

Provided, That if the BB sold at least KRW 800,000 after deliberation, it shall pay the difference to the Plaintiff, and the Plaintiff shall pay the transfer tax and all expenses therefor and interest accrued at least KRW 24% per annum for approximately KRW 1.2 billion from November 3, 2015 to the BB, and the period shall not exceed one year, and the period shall not exceed one year, and each of them shall be null and void after the lapse of one year.

③ On November 2, 2015, the Plaintiff and BB concluded a real estate sales contract (hereinafter “instant sales contract”) with respect to each of the instant land shares as KRW 1,200,000,00 (temporary payment on November 2, 2015) and entered into a special agreement as follows. BB paid to the Plaintiff the remainder of KRW 100,00,000,000, total principal and interest of the said sales contract, KRW 440,710,000, and KRW 4,710,000, and the transfer cost to be borne by the Plaintiff (registration tax) and KRW 107,201,963, and KRW 540,00,000,000, out of KRW 37,037, and KRW 100,000,000, the remainder of which the Plaintiff would take over, were paid to the Plaintiff on November 38, 2015, respectively.

- BB acquires 540,00,000 won (20%) used by the Plaintiff out of actual loans 2,700,000,000 won (20%) No. 11 of the land B, and No. 3,510,000,000 of the land B, No. 9 of the instant land B, No. 2 of the instant land.

- With respect to the maximum amount of debt No. 520,000,000 won of the land No. 15 of this case (Ba-mortgage 1), set off against the purchase price, and BB shall be cancelled.

④ On November 13, 2015, immediately after the completion of the registration for the transfer of ownership as to each of the instant parcels of land, BB cancelled the registration for the establishment of a neighboring mortgage on each of the instant parcels of land, which was concluded on November 16, 201 due to the contract concluded on the same date, as of November 16, 201, 3,510,000,000 won, ○○ Bank Co., Ltd., Ltd., the debtor, and the debtor, and completed the registration for the establishment of a neighboring mortgage on the same day.

⑤ On the other hand, at the time of the transfer, the Plaintiff and BB notified BB of the imposition of gift tax of KRW 198,103,969 on the gift tax of KRW 1,200,00,000 on the ground that the standard market price of BB was traded at KRW 2,218,00,000, which is considerably lower than the market price without justifiable grounds, around October 2016, the Defendant: (a) notified BB of the imposition of the gift tax of KRW 1,018,00,000 upon low-price transfer; (b) on November 4, 2016, BB made a request for pre-assessment review to the Defendant; and (c) on September 3, 2014, the Plaintiff claimed that the transfer of each of the instant shares was paid for the difference between the Plaintiff and the transfer of each of the instant shares by 16,000,000,0000.

C) The following circumstances revealed by the above recognition that BB transferred shares of each of the instant lands from the Plaintiff, namely, that the transfer of the instant lands was not a transfer for security, but a normal sale, and that the gift tax amount equivalent to KRW 200 million is paid due to the acquisition. The confirmation document of this case does not state that the Plaintiff and BB transfer shares of this case to secure repayment of obligations, and there is no statement about the refund of ownership in the case where the Plaintiff fully repaid obligations, and the agreement on distribution or settlement of the proceeds from sale is invalid after the lapse of one year. If the transfer of this case was not a transfer for security, BB would not have to pay the difference between the purchase price and the amount of claims to the Plaintiff at the time of the sales contract of this case, and if the transfer registration of ownership of each of the instant lands was made by the contract of this case, the Plaintiff would not have to actively pay the transfer income tax on each of the instant lands under Article 88 of the former Income Tax Act and Article 261 of the former Income Tax Act (amended by Presidential Decree No. 25172, Feb. 17, 20168, 2000).

2) Whether the calculation of acquisition value is unlawful

A) Comprehensively taking account of the relevant provisions in Articles 97(1) and (2), 114(2), 4(7) of the former Income Tax Act, and Articles 163(6) and 176-2(1) through (3) of the former Enforcement Decree of the Income Tax Act, the acquisition value, out of the necessary expenses to be deducted from the transfer value, shall be the actual transaction value paid for the acquisition of assets in the calculation of gains from the transfer of land. In cases where there is no account book, sales contract, receipt or other documentary evidence necessary to confirm the actual transaction value at the time of acquisition or where it is impossible to recognize or confirm the actual transaction value at the time of acquisition of the relevant assets due to account books or other documentary evidence, such as where there is no book, sales contract, receipt or other documentary evidence necessary for confirming the actual transaction value at the time of acquisition or where it is impossible to apply the acquisition value to the method of estimated investigation by applying the transaction example, appraisal value, conversion value, and standard market value in the conversion value, and where the sum of other necessary expenses is smaller than the total amount.

B) In light of the aforementioned legal principles, comprehensively taking account of the following circumstances, the instant shares in each of the instant land, which are known to the public health unit, Gap evidence Nos. 1, 4, and Eul evidence Nos. 2, 3, 5, and 7 by adding the purport of the entire pleadings, constitutes a case where there is no evidentiary document, such as a sales contract necessary to verify the actual acquisition value, or where there is no important part, or where there is insufficient material part. Thus, the instant disposition, which was made by the necessary expense report, which is the aggregate of the amounts under Article 163 (6) of the former Enforcement Decree of the Income Tax Act

① In filing a preliminary return on the tax base of transfer income, the Plaintiff initially stated the actual acquisition value of each share of each of the instant land in the statement of transfer income amount as KRW 825,00,000,00, and submitted a sales contract on April 20, 201 under the name of the Plaintiff and AAAA, which determined the purchase price as KRW 4,969/24,178 out of 00,000 square meters in 0,000,000 in 0,000,000 as documentary evidence.

② 그러나 AAA은 2016. 8. 23. 피고에게 '○○도 ○○시 ○○리 18-4번지 땅은 CCC과 함께 사고 다시 CCC에게 팔았다. 기억이 잘 안 나지만 2억 원 정도에 샀고, 돈이 급해 비슷한 가격에 팔았다.'라는 내용의 확인서를 작성ㆍ제출하였고, 원고는 2016. 8. 31. 피고에게 'DDD의 권유로 경기도 ○○시 ○○면 ○○리 18-4 토지를 취득하였고, 2001. 6. 29. 당시 AAA을 만난 적은 없으며 DDD이 가져온 계약서에 날인하였다. 현금을 대략 1억 정도 DDD에게 주었고, 약 한 달 뒤 2억 정도, 그 후 2억짜리 어음을 주는 등 모두 DDD에게 주었다.'라는 내용의 확인서를 작성ㆍ제출하였다.

③ Meanwhile, the Plaintiff did not have entered into a direct face-to-face and contract with the “A” during the instant pleadings, but the EE and its husband, the co-owner of each of the instant lands, claimed that the EE and CCC additionally paid KRW 300,000 per 367,70,000 (250,000 won per 3.3 square meters) for the Plaintiff and four persons, such as FF, to purchase 11,726 square meters and part of the land owned by the EE, which were the co-owner of each of the instant lands. As a result, the Plaintiff appears to have sold 14,760 square meters to the Plaintiff and four persons, such as FF, etc., and the amount to be borne by the Plaintiff was KRW 367,70,00 (4853.7 square meters x 250,000). The Plaintiff paid the above purchase price in full, and thereafter, the EE and CCC further claimed that the development costs were 3.

④ In addition, it is difficult to recognize that the Plaintiff actually paid KRW 367,70,00 in return for the acquisition of shares in each of the instant land as asserted by the Plaintiff, on the sole basis of data submitted by the Defendant as evidence, such as “CCC deposit notification (Evidence 6), “CCC confirmation document (Evidence 7), “FF and three other persons on August 26, 200, 200, such as “Real Estate Sales Contract (Evidence 8),” and “EE confirmation document (Evidence 9)” (Evidence 9), and there is no other objective evidence such as financial data that can be otherwise acknowledged.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

1) The conversion acquisition value of each of the instant land shares is less than the sum totaling KRW 36,122,513.