Necessary scope of penalty for cancellation under the apartment sales contract;

In the course of continuous purchase and sale of apartment houses, transactions (one transaction) and transactions (two transactions) that receive penalty due to the cancellation of both contracts are limited to a separate legal cause, and penalty paid in two transactions shall not be deducted as necessary expenses for one transaction subject to other income.

Article 14 (Real Taxation under Framework Act on National Taxes)

Article 21 (Other Incomes)

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 global income tax of KRW 6,69,470 against the Plaintiff on January 11, 2008 is revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by comprehensively taking into account the whole purport of the pleadings in each entry of Gap evidence 1 through 4, Gap evidence 5-1, 2, Gap evidence 6, Eul evidence 1 and 4:

A. On October 13, 2006, the Plaintiff entered into a sales contract with ○○○○○○○○○○○○○ apartment, 208, and 906 (hereinafter “instant first apartment”) around October 13, 2006, and paid KRW 30,000,000 to the new ○○○○ (hereinafter “instant breach of contract”). However, upon cancelling the said sales contract, the new ○○ (hereinafter “instant breach of contract”) was paid a penalty of KRW 30,000,000 on October 31, 2006.

B. Meanwhile, on October 2, 2006, in order to raise the sales price for the instant apartment No. 1, the Plaintiff: (a) concluded a sales contract for selling ○○○○○-14, ○○○○○○○○-ro, ○○○○-14, 102 Dong 2211 (hereinafter referred to as “instant secondary apartment”); (b) paid KRW 30,000,000 as the down payment for the instant apartment; (c) but upon the cancellation of the sales contract for the instant apartment, the Plaintiff paid KRW 30,000,000 for a penalty to Park Jong-ri on November 1, 2006, upon cancelling the sales contract for the instant second apartment; and (d) upon the cancellation of the sales contract for the instant apartment, the Plaintiff paid KRW 30,000,000 for penalty to Park Jong-ri on November 1, 206.

C. On January 11, 2008, the Defendant issued a disposition of imposition of global income tax of KRW 6,69,470 (including additional tax, but less than KRW 10) for the year 2006 on the ground that the penalty of this case is other income for breach or termination of a contract under Article 21(1)10 of the Income Tax Act (amended by Act No. 8144, Dec. 30, 2006; hereinafter the same) on the ground that the penalty of this case is equivalent to the penalty or compensation received due to breach or termination of a contract under Article 21(1)10 of the Income Tax Act (hereinafter the “instant disposition”).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

After concluding a contract to purchase the instant apartment under the Plaintiff’s name, the Plaintiff concluded a contract to sell the instant apartment, and received the down payment of KRW 30,000,000,00 for the purpose of raising the purchase price of the said apartment. Since the apartment price is too wide after the sales contract, the Plaintiff’s new seller of the instant apartment was bound to cancel the sales contract for the instant apartment at a price lower than the market price as at the time, as the new owner, who was the seller of the instant apartment, unilaterally cancelled the sales contract.

The plaintiff, upon the cancellation of each of the above, received the penalty of this case from ○○○, and the former ○○○, paid the penalty of KRW 30,000,00 to ○○○○, a purchaser of the second apartment of this case. Thus, the penalty of this case should be deducted from the penalty of this case by considering the penalty of KRW 30,00,00 as necessary expenses due to the cancellation of the sales contract of the second apartment of this case, and the disposition of this case otherwise reported is unlawful (In addition, the plaintiff asserts that the actual party to the first apartment sales contract of this case is the former ○○, and that the penalty of this case belongs to the former ○○, and therefore, the latter ○○ is also examined).

(b) Related statutes;

Article 14 (Real Taxation under Framework Act on National Taxes)

Article 21 (Other Incomes)

Article 27 (Calculation of Necessary Expenses)

Article 37 (Calculation of Necessary Expenses in Other Income)

C. Determination

(1) Under the principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007), a person to whom the title of the income, profit, property, act or transaction, which is subject to taxation, is merely nominal, and a person to whom the title actually belongs belongs, shall be the person to whom the title actually belongs. However, as to the above special circumstance, the claimant has the burden of proof.

However, as seen earlier, all receipts, etc. including sales contract for the first apartment in this case, were prepared in the Plaintiff’s name, and even if the former ○○○ sold the second apartment in order to prepare for the purchase price of the first apartment in this case, in light of the fact that it is difficult to deem that the former ○○ was the actual party to the sales contract for the first apartment in this case, and it is difficult to view that the former ○○○ was the intent to entirely transfer expenses or profits from the transaction as the actual party to the sales contract for the first apartment in this case (it can be deemed that the Plaintiff was the intent to donate the house-purchasing fund to the Plaintiff), it is insufficient to recognize the Plaintiff’s assertion to the effect that the actual purchaser of the first apartment in this case is the former ○○, and there is no other evidence to acknowledge it.

Therefore, this part of the plaintiff's assertion is without merit.

(2) Article 21 (1) 10 of the Income Tax Act provides that "the penalty or compensation received due to a breach or termination of a contract shall be the other income." Article 21 (2) of the same Act provides that "the amount of other income shall be the amount obtained by deducting the necessary expenses required therefor from the total income amount in the current year." Article 27 (1) of the same Act provides that "the amount to be included in the necessary expenses shall be the total amount which is generally accepted as expenses corresponding to the total income amount in the current year, and the necessary expenses shall be determined by Presidential Decree." Article 37 of the same Act provides that "in the calculation of other income, the amount to be included in the necessary expenses in the current year of the resident shall be governed by the following provisions." Article 21 (1) 1 of the same Act provides that "the total amount of the winning tickets or winner tickets bought by the winner or winner of the winner shall be the necessary expenses," and Article 27 (1) 2 of the same Act provides that "the total amount of the winning tickets or winner of the current year shall be included in the necessary expenses."

On the other hand, Article 87 of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890 of Feb. 28, 2007) enacted by delegation of Article 27 (3) of the Income Tax Act provides that "in respect of other income or temporary property income falling under any of the following subparagraphs, the amount equivalent to 80/100 of the amount received by the resident shall be deemed as necessary expenses" and Article 27 (1) 5 of the Income Tax Act provides that "the penalty for delay in moving into the house, among penalty and compensation under Article 21 (1) 10 of the Income Tax Act, is also recognized as necessary expenses

Furthermore, as seen above, the penalty of this case, which is acquired by the cancellation of the sales contract for the apartment of this case as to the first apartment of this case, shall be deemed to be the penalty or compensation received due to the breach or termination of the contract under Article 21 (1) 10 of the Income Tax Act. Meanwhile, Article 37 (1) 1-2 of the same Act and Article 87 of the Enforcement Decree of the same Act, which provide special provisions on the calculation of necessary expenses, do not apply to the penalty of this case. Thus, in determining the amount of income subject to the penalty of this case, the sum of the expenses corresponding to the gross income of this case can be deducted from the necessary expenses pursuant to subparagraph 2 of Article 37 and Article 27 (1) of the Income Tax Act, and since it means the expenses directly related to the penalty of this case to obtain the gross income amount, it is difficult to view that the penalty of this case concerning the second apartment of this case should be deducted from the gross income amount as necessary expenses to be paid from the sale contract of this case to the plaintiff separately from the sale contract of this case, as necessary expenses concerning the penalty of this case 200.

Therefore, the Defendant’s disposition of imposing penalty of KRW 30,00,000 on the second apartment of this case asserted by the Plaintiff is lawful, and the Plaintiff’s assertion on this part is without merit.

3. Conclusion

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