(a) Where the land transaction value between persons in a special relationship with a corporation is the value close to the standard market value of taxation, and the value falls short of 1/5 of the appraised value of a bank or the Korea Appraisal Board, the case holding that it constitutes wrongful calculation;

(b) Criteria for calculating the transfer value where Article 55(1) of the Income Tax Act applies (=market price)

(c) the meaning of “market price” under Article 170(8) of the Enforcement Decree of the Income Tax Act;

A. The case holding that since a corporation and a person with a special relationship under Article 55 (1) of the Income Tax Act and Article 111 of the Enforcement Decree of the same Act, since the transaction value of the land transferred to a corporation is considerably lower than the standard market value under the Local Tax Act, and is less than 1/5 of the appraisal value of the bank or the Korea Appraisal Board under the Local Tax Act, even if considering the circumstances where a building owned by the company is constructed on the above land, it cannot be seen as a reasonable transaction value to be a normal transaction value to be done by the economic person, it is difficult

B. Where Article 55(1) of the Income Tax Act applies because the transfer of assets by a resident with transfer income is deemed to reduce the tax burden on transfer income due to the transfer of assets at a price below the market price with a related corporation with the resident, the transfer value shall be calculated at the market price in accordance with Article 170(8) of the Enforcement Decree of the same Act and shall not be calculated at the market price based on the standard

C. The “market price” under Article 170(8) of the Enforcement Decree of the Income Tax Act refers to the objective exchange value formed through normal transactions in principle, but when it is difficult to verify such market price, the appraised value by objective and reasonable methods may also be deemed as the market price.

(b)Article 55(1) of the Income Tax Act, Article 111(1) and (2) of the Enforcement Decree of the same Act;

A. Supreme Court Decision 88Nu8630 delivered on April 11, 1989 (Gong1989,772) 89Nu8095 delivered on May 11, 1990 (Gong1990,1292) 89Nu4772 delivered on July 24, 1990 (Gong1990,1810). Supreme Court Decision 88Nu1520 delivered on July 25, 1989 (Gong1989,1311) Da.90Nu7302 delivered on April 23, 1991 (Gong191,1533)

[Judgment of the court below]

Head of the tax office

Seoul High Court Decision 90Gu3159 delivered on February 27, 1991

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal by the Plaintiff’s attorney.

1. The court below determined that the Plaintiff’s acquisition and ownership of the instant land on September 21, 196 to the Non-Party D Co., Ltd. on June 23, 1986 that the Plaintiff transferred gold KRW 81,60,00 to the Non-Party D Co., Ltd. on June 23, 1986; the Plaintiff and the Non-Party Co., Ltd. were related parties under Article 5(1) of the Income Tax Act and Article 111 of the Enforcement Decree of the Local Tax Act; the Plaintiff’s taxation standard market value under the Local Tax Act at the time of transfer of the said land was KRW 80,260,00; the Plaintiff’s Korean National Bank concluded a lease agreement on the above Non-Party Co., Ltd.’s building established on the said land between the above Non-Party 4 and the above Non-Party 5’s employees on the basis that the Plaintiff’s economic appraisal price was lower than the market value at the time of the above appraisal by the Defendant’s reasonable market value at 80.

2. In light of the relevant evidence and records and the relevant Acts and subordinate statutes, the judgment of the court below that the Plaintiff’s act of transferring the land of this case constitutes a wrongful calculation under Article 55(1) of the Income Tax Act is just and acceptable, and it cannot be deemed that the court below erred by misapprehending the legal principles as to wrongful calculation or wrongful calculation that found the facts against the rules of evidence in violation of the rules of evidence or the legal principles as to wrongful calculation, without making proper deliberation as to this point, and it cannot be deemed that the judgment below did not properly err by misapprehending the legal principles as to wrongful calculation and wrongful calculation.

In case where Article 55 (1) of the Income Tax Act applies as it is deemed that the transfer of assets by a resident with capital gains is reduced unreasonably due to the transfer of assets with a special relation with the resident and the transfer of assets below the market price, the transfer value shall be calculated according to the market price pursuant to Article 170 (8) of the Enforcement Decree of the same Act, and it shall not be calculated according to the standard market price such as the theory of lawsuit (see Supreme Court Decision 88Nu1520, Jul. 25, 1989).

In addition, the "market price" under Article 170 (8) of the Enforcement Decree of the same Act refers to the objective exchange value formed through a normal transaction in principle, but when it is difficult to verify such market price, the appraised value in an objective and reasonable manner may also be deemed the market price (see, e.g., Supreme Court Decision 90Nu7302, Apr. 23, 1991). Accordingly, compared with relevant evidence, the court below's finding that the market price at the time of transfer of the land in this case is KRW 489,324,00, is not somewhat insufficient for the reasons stated in the judgment of the court below, but it is just and acceptable (see, e.g., Supreme Court Decision 90Nu7302, Apr. 23, 1991).

In the end, all arguments are not acceptable.

3. Therefore, the plaintiff's appeal is dismissed, and the costs of appeal are assessed against the plaintiff who has lost. It is so decided as per Disposition by the assent of all participating Justices.

Justices Yoon Jae-ho (Presiding Justice)