Whether the taxable amount of gift tax is reasonable by evaluating it as a transaction example of neighboring apartments

If there are other trading cases identical or similar to the donated property according to the substance over form principle, and the objective exchange price formed by normal transactions is reasonable to evaluate the donated property at the market price.

Article 60 of the Inheritance Tax and Gift Tax Act (Principles of Appraisal, etc.)

Article 49 (Principles, etc. of Appraisal)

1. Of the instant lawsuit, the part on which the Defendant sought revocation of the disposition of imposition of KRW 7,841,857, which was corrected on November 16, 2006 by reduction on December 19, 2006, among the disposition of imposition of KRW 60,296,50 on the gift of October 14, 2004 against the Plaintiff on December 19, 2005.

2. The plaintiff's remaining claims are dismissed.

3. The costs of lawsuit shall be borne by the defendant.

The Defendant’s disposition of imposition of gift tax of KRW 60,296,500 as to the portion of gift as of October 14, 2004 against the Plaintiff on December 19, 2005 (which appears to be erroneous on December 15, 2005) is revoked.

1. Details of the imposition;

The following facts are not disputed between the parties, or may be acknowledged by taking into account the whole purport of the pleadings in each entry of evidence Nos. 1, 2, 3, 5-1, 2, and 6 of the evidence Nos. 1, 5-1, 2, and 6:

A. On October 14, 2004, the Plaintiff, as his mother, donated ○○○○○○○-dong ○○○○○○○-dong ○○○○○-dong ○○○○-dong ○○○○ apartment (hereinafter “instant apartment”).

B. On December 3, 2004, the Plaintiff reported and paid the gift tax on the instant apartment at KRW 420,000,000, which is the standard market price publicly notified by the Commissioner of the National Tax Service, when calculating the value of donated property of the instant apartment.

C. Accordingly, the defendant investigated the sales case of neighboring apartment before and after October 14, 2004, which was the date of donation of the apartment of this case, and as a result, it revealed that the apartment of this case was traded with the same Dong and the same area as the apartment of this case, other 1505 apartment of this case (hereinafter "the first sale apartment of this case") on October 13, 2004 640,000,000 won. The defendant applied Article 60 (1) and (2) of the Inheritance Tax and Gift Tax Act (amended by Act No. 7335 of Jan. 14, 2005; hereinafter "the Inheritance Tax and Gift Tax Act"), Article 49 (1) and (5) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 18627 of Dec. 31, 2004; hereinafter "the first sale apartment of this case") to the plaintiff as the selling price of this case, 160,5000 won.

D. On July 3, 2006, the Plaintiff dissatisfied with the instant disposition and filed a request with the National Tax Tribunal for adjudication on July 3, 2006, and on November 2, 2006, the National Tax Tribunal decided on the Plaintiff on November 2, 2006 that “the instant disposition should be corrected by considering the Plaintiff’s value of donated property of the instant apartment as the trading price of the instant apartment, Do, the same area, and 504 apartment (hereinafter “the instant apartment”) with the same Do, the same Do, and another 504 apartment (hereinafter “the instant apartment”) as the trading price of the instant apartment, 615,00,000 won.”

E. According to the above decision of the National Tax Tribunal, the Defendant issued a gift tax on the value of donated apartment of this case at KRW 615,00,000,000. On November 16, 2006, the Defendant corrected and notified the Plaintiff of the amount of gift tax imposed on the Plaintiff from KRW 60,296,50 to KRW 7,841,857.

2. Ex officio determination of principal safety: As to the part of the instant disposition seeking revocation of the imposition of KRW 7,841,857, which was corrected by reduction

A. Where a corrective disposition is taken after an initial disposition is cancelled, it is limited to a new disposition that has the effect of revoking a part of the original disposition, not to fix a specific tax liability for the remaining amount after the revocation of the original disposition, and the corrective disposition has the legal effect only with respect to the portion of the amount of tax reduced by it, which is not independent from the original disposition, and it is a modification of the original disposition. Therefore, there is no benefit of lawsuit seeking revocation as a disposition that has the favorable effect to the taxpayer, and there is no benefit of lawsuit seeking revocation as a partial revocation as a result of a partial revocation of the amount of tax.

B. In light of the foregoing legal principles, the part seeking revocation of the disposition of imposition of KRW 7,841,857, which was corrected among the disposition of this case, does not have the interest in seeking revocation of the disposition of this case.

3. Whether the remaining part of the disposition of this case is lawful

A. The plaintiff's assertion

(1) Article 49(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is the basis of the instant disposition, requires taxpayers to perform any impossible obligation at all by ensuring that the transaction of other property similar to the donated property is based on the arbitrariness and flexibility of the transaction. Moreover, since the citizens’ property rights are arbitrarily infringed by the Enforcement Decree, rather than the law, it is unconstitutional and unlawful that is contrary to the principle of no taxation without law. Thus, the instant

(2) The standard market price of the apartment in the same Dong to which the apartment of this case belongs is different, and the apartment of this case differs depending on the same Dong, the same structure, the same direction, and the same scale, even on the same floor. Even on the same floor, the price vary depending on the seller’s circumstances, location, facility condition, direction, view, etc., the Defendant’s assessment of the price of the apartment of this case in comparison with the 1 and 2 sales cases was not reflected in the accurate market price.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

The following facts may be acknowledged, either in dispute between the parties, or in combination with the whole purport of pleadings, on each entry of evidence No. 2-1 through 5, evidence No. 4-1 through 10, and evidence No. 7 through 11:

(1) The second sale apartment of this case is located on the ○○○○ apartment, ○○○ apartment, ○○○○ apartment, and is located on the 3rd floor, and only the location of the apartment and the floor of this case, which are located on the same direction, was traded in the same parallel-type apartment located on the same direction, and in the same parallel-type apartment in the purchase price of 615,00,000 won on January 31, 2005.

(2) The trend of the apartment of this case and the ○○○○ apartment complex, where the second sale apartment of this case is located, is considerably far away from ○○○ apartment complex in the south of ○○○○ apartment complex, and the direction of the apartment complex is different, and there seems to be no difference in the view right per person. According to the real estate sale and purchase schedule offered on the Internet ○○ apartment site, the general transaction price of the apartment of this case was KRW 595,000,000, the sales price was KRW 565,000,000, the sales price was KRW 625,000,000, and the sales price was KRW 625,000,000.

(3) On April 30, 2004, the standard market price of the apartment of this case pursuant to a public notice by the Commissioner of the National Tax Service is KRW 420,000,000, and there is no particular difference between the standard market price of the apartment of this case and KRW 442,50,000, which is the standard market price of the

D. Determination

(1) Whether Article 49(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act is unconstitutional or unlawful

(A) According to Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act, when the value of inherited property is based on the "market price as of the date on which the inheritance commences," the meaning of "market price" includes the value recognized as "market price under the conditions as prescribed by the Presidential Decree such as the expropriation, public auction price, appraisal price, and appraisal price, etc. in addition to the value which is generally accepted when transactions take place freely between many and unspecified persons. Article 49(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which was enacted upon delegation by the parent law, provides that "market price of inherited property" shall be the target transaction for which the sale, appraisal, expropriation, auction, or public sale is conducted within six months before and after the base date of appraisal, and provides specific criteria for value as each subparagraph. However, Article 49(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act expands the target

(B) Therefore, comprehensively taking account of the following: (a) the “market price based on which the Inheritance Tax and Gift Tax Act is based on the standard of evaluation of inherited property” under the premise that it is, in principle, an objective exchange price formed through normal transactions; and (b) it is not a party who has an incidental transaction pursuant to only one time; (c) the Inheritance Tax and Gift Tax Act delegates specific standards to be considered as the market price by the Presidential Decree because it is difficult to provide for any method of transaction according to complicated transaction reality and continuous change in the form of law; (d) Article 49(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides for the approximate standard of transaction which is already recognized as the market price; and (e) it is difficult to view the same or similar transaction price of the relevant apartment or similar property as the market price in light of the legislative purport of the Act, as newly established by Presidential Decree No. 18177, Dec. 30, 203; and (e) it is difficult to view that the sale price of the relevant real estate is unreasonable or similar transaction price.

(2) Determination on similarity between the apartment of this case and the similar apartment of this case

There is no evidence to transfer the apartment of this case and the second similar apartment of this case that are not similar.

Rather, as seen in the above facts, it is reasonable to view that the apartment of this case and the second sale apartment of this case reflects the objective exchange value of the apartment of this case as the transaction value of the apartment of this case as the transaction value of other properties identical with the size, location, purpose, and item of the apartment of this case, which are identical with that of the apartment of this case and the second sale apartment of this case, with only the third and fifth floors, without any big difference in view of the view. The standard market price publicly notified by the Commissioner of the National Tax Service is also different. The sale price of the second sale apartment of this case is within the scope of the estimated sale value on the Internet real estate sale price sheet for the apartment of this case, and the time of sale is not different from the nearest one month from the donation day of this case.

(3) Sub-decisions

Therefore, as of October 14, 2004, the date of donation, the Defendant’s investigation into the trading case for three months before and after the date of the donation, and considering the sales price confirmed in the trading case of the second sale apartment of this case, which is the same in the same direction as that of the apartment of this case, as the market price of the apartment of this case, the disposition of this case is legitimate disposition under Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act, and Article 49(1) and (5) of the Enforcement Decree of the same Act.

4. Conclusion

Therefore, the part of the instant lawsuit seeking revocation of the disposition of imposition of KRW 7,841,857, which was corrected, among the dispositions of this case, is dismissed as it is unlawful, and the remainder of the Plaintiff’s claim is dismissed as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

The Inheritance Tax and Gift Tax Act (amended by Act No. 7335 of January 14, 2005)

Article 60 of the Inheritance Tax and Gift Tax Act:

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal"). In such cases, the value (excluding cases falling under the provisions of Article 63 (2)) appraised by the method of appraisal stipulated in Article 63 (1) 1 (a)

(2) The market price under paragraph (1) shall be the price which is considered to be normal in the case of free trade between many and unspecified persons, and shall include the price of expropriation, public auction, appraisal price, etc. which is recognized as the market price under conditions

(3) In applying paragraph (1), where it is difficult to compute the market price, the price assessed by the methods prescribed in Articles 61 through 65 shall be based on the types, scale, transaction conditions, etc. of the relevant property.

(4) In applying paragraph (1), the value of the donated property added to the value of the inherited property pursuant to Article 13 shall be based on the market price as of the date of donation.

Article 61 of the Inheritance Tax and Gift Tax Act

(1) Real estate shall be appraised by the following methods:

2. Buildings:

The value calculated and publicly announced by the Commissioner of the National Tax Service at least once a year in consideration of the new construction price, structure, use, location, year of new construction, etc.

(3) Notwithstanding the provisions of paragraph (1), with respect to multi-family housing, officetels and commercial buildings (including land annexed thereto) prescribed by Presidential Decree in consideration of the use, area, number of buildings partitionedly owned by a building, etc. as co-ownership of land attached to a building and partitioned ownership, the Commissioner of the National Tax Service shall appraise the value of land and buildings calculated and publicly announced at least once a year in a lump sum, in consideration of the type, size, transaction status, location

The Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18627 of Dec. 31, 2004)

Article 49 of the Inheritance Tax and Gift Tax Act

(1) For the purpose of Article 60 (2) of the Act, the term "those recognized as the market price as prescribed by Presidential Decree, such as expropriation or public sale price, and appraised price, etc." means the price confirmed pursuant to one of the following subparagraphs in cases of sale, appraisal, expropriation, auction (referring to an auction under the Civil Execution Act; hereafter the same shall apply in this paragraph) or public auction (hereafter referred to as "sale, etc." in this paragraph) during a period of not more than six months (three months in the case of donated property; hereafter referred to as the "evaluation period" in this paragraph) before and after the evaluation base date: Provided, That even during a period not falling under the evaluation period, if it is deemed that there are no special circumstances of price fluctuation in view of the management status, passage of time, changes in surrounding environment, etc. of the company issuing stocks during the period from the evaluation base date to the date falling under any subparagraph of paragraph (2), the relevant price of sale, etc. may be included in the price confirmed pursuant to

1. If the fact of sale and purchase of the relevant property exists, the transaction value: Provided, That this shall not include cases where the transaction value is deemed objectively unfair, such as transactions with persons with a special relationship as referred to in Article 26 (4);

2. In case where there exist the appraisal values appraised by the reliable appraisal institutions (hereinafter referred to as the “appraisal institutions”) as prescribed by the Ordinance of the Ministry of Finance and Economy with respect to the relevant property (excluding the properties prescribed in Article 63 (1) 1 of the Act), the average value of such appraisal values: Provided, That this shall not apply to the cases falling under any of the following items, and in case where the relevant appraisal values fall short of 80/100 of the values appraised under Articles 61, 62, 64 and 65 of the Act (including the case where it is deemed improper in view of the purpose of appraisal, etc. after going through the consultation deliberation committee as prescribed in Article 56-2 (2) even if the relevant appraisal values are not less than 80/100, the value of such appraisal values shall be based on the values appraised by the request of other appraisal institutions by the head of tax office (including the head of tax office, etc.; hereinafter referred to as

(a) Values which are not suitable for the payment purpose of inheritance tax and gift tax, such as the assessment of relevant property on the condition that certain conditions are met;

(b) Value of the relevant property not appraised in the original form as of the standard date of appraisal;

3. Where there exists a fact of expropriation or public auction or public auction of the property concerned, the compensation therefor, the auction price or the auction price: Provided, That where the heir, donor, donee or a person in a special relationship with him/her (referring to a person in a relationship provided for in any subparagraph of Article 19 (2). In such cases, where one shareholder, etc. referred to in Article 19 (2) shall be deemed as "he/she, etc.", the value of the relevant public auction shall be excluded.

(2) In applying the provisions of paragraph (1), whether a value under any subparagraph of paragraph (1) falls within six months before or after the standard date of appraisal (three months for donated property), shall be determined on the basis of the dates prescribed in the following subparagraphs, and where the value deemed the market price under the provisions of paragraph (1) is two or more, the value falling under the nearest day before or after the standard date of appraisal

1. The sales contract date for the case of paragraph (1) 1;

2. In cases falling under paragraph (1) 2, the date on which a appraisal statement is prepared;

3. In cases falling under paragraph (1) 3, the date the compensation amount, etc. is determined.

(5) In applying the provisions of paragraph (1), where there exists a value falling under any of the subparagraphs of the same paragraph of the relevant property and the area, location, purpose of use and items of other property identical or similar, the relevant value shall be deemed the market value under Article 60 (2)