National High Court Decision 2007Du3526 (Law No. 29, 2008)

In the case of simple exchange, it shall be deemed impossible to confirm the actual transfer value.

In the case of an exchange, if the transaction is a value exchange based on the value of the object, the market price appraisal of the object of exchange is accompanied by the procedure for settlement of the difference shall be deemed to be the case where the actual transfer value can be confirmed, but in the case of a simple exchange, the actual transfer value shall not be confirmed.

The contents of the decision shall be the same as attached.

Article 96 (Transfer Price)

Article 100 (Calculation of Gains on Transfer)

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 63,084,762 against the Plaintiff on June 1, 2007 is revoked.

1. Details of the disposition;

A. On August 18, 2003, the Plaintiff acquired the instant real estate at a successful bid price of KRW 1,007,000,000 in a voluntary auction procedure for each real estate listed in the separate sheet (hereinafter “the instant real estate”). On December 29, 2004, the Plaintiff entered into an agreement with Kim ○○-dong, Incheon, ○○○-dong, Incheon, ○○○○-dong, 532-○-dong, and two parcels and its ground telecoma (hereinafter “non-party’s real estate”) to exchange the instant real estate with the instant real estate, and transferred the instant real estate to Kim ○-do on June 7, 2005.

B. On November 30, 2005, when filing a preliminary return on the tax base of transfer income to the Defendant, the Plaintiff reported that the transfer value is 1,430,000,000 won based on the actual transaction value, the acquisition value is 1,407,00,000 won based on the actual transaction value, and necessary expenses is 65,00,000 won.

C. However, on the ground that the transfer value of the instant real estate is not a justifiable transaction value, the Defendant calculated the transfer value based on the standard market price and accordingly calculated the transfer margin based on the acquisition value as the standard market price. On June 1, 2007, the Defendant issued the instant disposition imposing KRW 63,084,762 on the Plaintiff for the year 2005.

[Reasons for Recognition] Each entry into facts without dispute, Gap 1, 6, 8, 9, 10, Eul 1, 2, 3, and 5 (including virtual numbers), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Where the actual transaction value at the time of donation is unknown, the transfer margin of donated assets shall be calculated by deeming the transaction example value, appraisal value, and conversion value as acquisition value pursuant to Article 97 (1) 1 (c) of the former Income Tax Act. Article 163 (9) of the former Enforcement Decree of the Income Tax Act is invalid in light of the principle of no taxation without law due to the lack of specific delegation basis under the parent law. However, the instant disposition that the Defendant deemed as the actual transaction value at the time of acquisition assessed by the inheritance tax

(b) Related statutes;

Article 96 (Transfer Price)

Article 100 (Calculation of Gains on Transfer)

C. Determination

(1) The transfer value of real estate shall be based on the actual transaction value if the transferor or transferor makes a report on the actual transaction value at the time of transfer (Article 96(1)6 of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same shall apply). However, even if the transferor makes a report on the actual transaction value, if it is impossible to confirm the actual transaction value at the time of transfer due to documentary evidence, the transfer value cannot be deemed the actual transaction value reported by the transferor. In order, the transfer value shall not be deemed the actual transaction value reported by the transferor, the appraisal value, and the conversion value shall be based on the standard market value if it is not confirmed (Article 114(5) of the former Income Tax Act; Article 176-2(1) and (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618, Feb. 22, 2008; hereinafter the same shall apply).

(2) According to the evidence evidence Nos. 6 and 7-1 and 2, the Plaintiff may recognize the fact that the Plaintiff arbitrarily sets the value of the instant real estate as KRW 1,430,000 between the parties without undergoing the market price appraisal in exchanging Kim○-do and the instant real estate and the instant real estate. Thus, the value of the instant real estate determined by the Plaintiff and Kim○-do cannot be deemed as the actual transaction value reflecting the objective value at the time of transfer of the instant real estate. Thus, the transfer value shall not be deemed as KRW 143,00,000, which is the actual transaction value reported by the Plaintiff, in turn, and shall be based on the transaction example value, appraisal value, and conversion value. Such price cannot be confirmed. As long as the transfer value is based on the standard market price, the acquisition value shall also be based on the standard market price (Article 100(1) of the former Income Tax Act). Therefore, the Defendant’s disposition of this case is legitimate and without merit, and the Plaintiff’s assertion is without merit.

3. Conclusion

Thus, the plaintiff's claim of this case is dismissed for reasons.