Cho High Court Decision 2013 0540 (O6, 2013)

Since the Plaintiff cannot be deemed to have directly limited the farmland of this case, it does not meet the requirements for capital gains tax reduction or exemption.

The farmland in this case appears to have been cultivated by proxy by neighboring residents, and it is difficult to see that more than half of the farming works have been cultivated directly with his own labor, and the disposition excluding the requirements for reduction or exemption of capital gains tax for self-defense for eight years is justifiable.

Article 70 of the Restriction of Special Taxation Act for Substitute Land for Farmland

Article 67 of the Enforcement Decree of the Restriction of Special Taxation Act: Requirements for Reduction or Exemption of Transfer Income Tax on Substitute Land

2013Guhap3369 Revocation of Disposition of Imposing capital gains tax

OO

O Head of tax office

April 4, 2014

May 16, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of capital gains tax of KRW 114,166,040 against the Plaintiff on July 13, 2012 shall be revoked.

1. Details of the disposition;

On June 10, 2005, the Plaintiff sold the instant farmland to AA on July 6, 201, and completed the registration of ownership transfer on August 3, 201.

In addition, on September 18, 201, the Plaintiff purchased 496/1646 shares and 400 square meters of OO-type OO-type OO-type O-type O-type O-type O-type O-type O-type O-type O-type O-type O-type O-type O-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-type(hereinafter “the instant substitute farmland”) on November 15, 201.

On September 30, 2011, the Plaintiff made a preliminary return on the tax base for transfer income of KRW 0,00,00,000 to the Defendant, applying the special deduction amounting to long-term holding KRW 47,073,313, and the reduction or exemption amount of capital gains tax on farmland substitute land amounting to KRW 214,445,097, as the transfer value of KRW 535,00,00,000, acquisition value of KRW 273,481,590.

However, the Defendant deemed the transfer margin of KRW 326,518,00 (=transfer value of KRW 535,00,000 - Acquisition value of KRW 208,481,00). On the other hand, the Plaintiff excluded the application of special deduction for long-term holding and exemption for capital gains tax on farmland substitute land from application of reduction and exemption for long-term holding, and notified the Plaintiff of KRW 114,16,040 for capital gains tax in July 13, 2012 (hereinafter “instant disposition”).

On October 8, 2012, the Plaintiff filed an objection with the Defendant and filed an appeal with the Tax Tribunal on February 5, 2013, but was dismissed by the Tax Tribunal on June 26, 2013.

[Ground of recognition] Unsatisfy, Gap evidence 1, Gap evidence 2 (including provisional number; hereinafter the same shall apply), Eul evidence 1 to 3, the purport of the whole pleadings

2. Summary of the parties' arguments;

A. The plaintiff

1) After acquiring the farmland of this case on June 10, 2005, the Plaintiff temporarily cultivated BB on behalf of the Plaintiff, and directly cultivated the farmland of this case with CCC, which is the Plaintiff’s land that acquired neighboring farmland adjoining the farmland of this case, from May 2008, from May 1, 2008.

Although the Plaintiff did not possess agricultural machinery and worked through DD in which rice, falll, rice, beer, and pesticide spraying using agricultural machinery were not carried out by the Plaintiff, the Plaintiff directly carried out other farming works, namely, farming water rearrangement, fakeing, falsing, frying, cutting off, frying, cutting off, and cutting down, etc.

Therefore, the Plaintiff’s disposition of this case imposing capital gains tax on farmland substitute land under Article 95(2) of the former Income Tax Act (amended by Act No. 11146, Jan. 1, 2012; hereinafter “former Income Tax Act”) is unlawful, even though it is subject to reduction or exemption of capital gains tax on farmland substitute land under Article 70(1) of the former Restriction of Special Taxation Act (amended by Act No. 11133, Dec. 31, 201; hereinafter “former Restriction of Special Taxation Act”).

2) Even if it is unclear whether the Plaintiff’s self-determination in 2008 is the Plaintiff’s self-determination, it is clear that the Plaintiff’s self-determination was for more than two (2) years from the 2009, namely, the three (3) years immediately before the date of transfer

B. Defendant

The Plaintiff acquired the farmland of this case on June 10, 2005 and 2008 on behalf of DD through DD, and from 2009 to August 3, 201, DD and EE, a neighboring village resident, had dD and EE engaged in major farming operations, including in-house season, and FF, a land owner, etc. engaged in the other farming operations, such as water atmosphere. Thus, the Plaintiff cannot be deemed to have been directly cultivated or self-Cultivating, namely, engaging in the cultivation of crops in the farmland of this case or cultivated 1/2 or more of farming operations with its own labor.

In addition, since the substitute farmland of this case, which the Plaintiff acquired as substitute land, each of the substitute farmland of this case, is planted by 50 pieces of fruit trees, not rice cultivated in the farmland of this case, so it cannot be deemed that the Plaintiff acquired each of the substitute farmland of this case by "the necessity for cultivation" under Article 70 (1) of the former Restriction of Special Taxation Act.

Therefore, this case's disposition that imposed capital gains tax is justifiable by excluding the special deduction for long-term holding under Article 95 (2) of the former Income Tax Act, and the application of capital gains tax reduction and exemption provisions for farmland substitute land under Article 70 (1) of the former

3. Determination

A. The issues of the case

1) According to Article 95(2) of the former Income Tax Act, the special deduction for long-term possession of assets, the holding period of which is not less than three years, is excluded from the application of the tax rate of Article 104(1)4 through 10. One of them is "non-business land" under Article 104(1)8. According to Article 104-3(1)1(a) of the former Income Tax Act and Article 168-6(1) of the Enforcement Decree thereof, "non-business land" in this context includes farmland for which a farmer does not always engage in the cultivation of crops and does not cultivate more than 1/2 of the farming work with his own labor for a certain period.

2) In addition, according to Article 70(1) of the former Restriction of Special Taxation Act, the tax amount equivalent to 100/100 of the transfer income tax shall be reduced on the income accrued when a person who resides in the seat of farmland cultivates the land as another farmland due to the necessity for cultivation. However, according to Article 67(2) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; Presidential Decree No. hereinafter “former Enforcement Decree of the Restriction of Special Taxation Act”), “direct farming” refers to the case where a resident engages in the cultivation of farming in his own farmland on a regular basis or cultivates one-half or more of the farming works with his own labor.

3) As seen earlier, in order to be subject to the application of the special deduction for long-term holding or the reduction or exemption of capital gains tax on the farmland substitute land, the Plaintiff should be deemed to have been “self-arable or direct cultivation of the farmland in this case.” Therefore, in this case, the issue is whether the Plaintiff may be deemed to have been engaged in the farming in the farmland in this case or having cultivated at least 1/2 of the farming works with his own labor in the farmland in this case. The burden of proof lies on the Plaintiff, namely, a taxpayer who asserts the special deduction for long-term holding or the exemption of capital gains tax on the farmland substitute land (see, e.g., Supreme Court Decision 92Nu1893, Jul.

B. Determination

In full view of the evidence mentioned above, Gap's evidence, evidence of Nos. 5-3, 5-4, 5-6, 6-2 through 4, Eul's evidence of Nos. 5 through 8, witness DNA's partial testimony, and the purport of the whole arguments as to the OO head of the OO at the time of OO of this court, the following circumstances are revealed.

① During the Defendant’s investigation process of transfer income tax, the Plaintiff, as a family owner, stated that “the Plaintiff acquired the farmland of this case in this case, was at a high location in the ground, and the transferor was immediately left and was planned to be a new city.”

② After acquiring the farmland of this case on June 10, 2005, the Plaintiff continued to set the farming houses to BB from 1977 to 2008 from the farmland of this case.

③ The Plaintiff applied for direct payments compensating for rice income, etc. in 2008, and received KRW 98,680, but around November 21, 2008, the Deliberation Committee on Subsidies compensating for Rice Income, etc. decided to confirm that the Plaintiff had not actually cultivated. Accordingly, on February 13, 2009, the head of the OOO notified the Plaintiff that he would refund the direct payments compensating for rice income, etc. compensating for rice income. The Plaintiff paid the aforementioned direct payments compensating for rice income, etc. on July 22, 2009.

④ At the time of the Plaintiff’s gathering in 2009, the Plaintiff began to set rice farmers into the farmland of this case with the help of nearby residents and her neighbors. Specifically, DDR and her EE, who are neighboring residents, were working for the Plaintiff at the cost. DD had the same work as not only the farmland of this case but also the farmland of this case owned by the Plaintiff, CCC (OOOO-dong OO-dong OO-dong 2,149 square meters) (OOO-dong 2,149 square meters). In addition, in light of the Plaintiff’s testimony and 5-GF witness testimony, FF 2,000, which is the Plaintiff’s owner of the farmland of this case and its neighboring farmland, and 5-GF 5-G witness testimony and 5-GF 2,000,000,000 of the Plaintiff’s testimony and 5-GF 2,000,000 prior to the start of the Plaintiff’s work.

In full view of the foregoing circumstances, from May 2008 to August 3, 201, the Plaintiff was engaged in cultivating crops in the instant farmland from May 3, 201 or at least 1/2 of farming work.

not be deemed to have cultivated with its own labor force.

Therefore, the disposition of this case imposing capital gains tax by excluding the application of the provision on special deduction for long-term holding under Article 95 (2) of the former Income Tax Act and the provision on reduction or exemption of capital gains tax on farmland substitute land under Article 70 (1) of the former Restriction of Special Taxation Act is justifiable. Thus, the plaintiff's assertion against this cannot be accepted.

4. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.