Early High Court Decision 2010Du0136 ( October 24, 2010)

Reduction of or exemption from capital gains tax for farmland substitute land

It is difficult to see that the Plaintiff directly cultivated farmland that has been working in a livestock cooperative without any basic agricultural machine such as a horse, etc., in light of the fact that he/she directly cultivated farmland without any basic agricultural machine.

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 89,550,000 for the year 2008 against the Plaintiff on May 1, 2009 (the date of notification stated in the evidence No. 5 is specified as the date of disposition).

1. Details of disposition;

A. On April 6, 2004, the Plaintiff purchased 1/2 shares (hereinafter “previous farmland”) out of 3,452 square meters prior to the 367 m2 m2 (hereinafter “previous farmland”). The previous farmland was completed on February 1, 2008 on the ground that the sale was made on February 1, 2008.

B. On March 17, 2008, the Plaintiff acquired mm-si 392-5 Dog-ri 1,217 m2 (hereinafter referred to as “alternative farmland”) with mm-si, and completed the registration of ownership transfer in its name.

C. The Plaintiff, on April 30, 2008, applied the general tax rate to the Defendant on April 30, 2008, filed an application for reduction of capital gains tax for the previous farmland amounting to 36,567,000 won.

D. The Defendant did not fall under the requirements for reduction and exemption of capital gains tax due to substitute farmland, and deemed that the Plaintiff did not directly cultivate the previous farmland and substitute farmland, and thus, applied the tax rate of land for non-business on May 1, 2009 (the notification date of entry No. 5) to the Plaintiff, thereby correcting and notifying KRW 89,550,000 for capital gains tax belonging to the year 208 (hereinafter “instant disposition”).

E. On July 30, 2009, the Plaintiff filed an objection against the Defendant on July 30, 2009, but was dismissed on September 11, 2009, and again filed an appeal with the Tax Tribunal on December 14, 2009, but was dismissed on June 24, 2010.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 4, 5, 7, 8, and Eul evidence No. 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff, while residing in the previous farmland for more than three years (including the concept of land adjoining; hereinafter the same shall apply) at the former farmland, such as acquiring the previous farmland and cultivating spawals, etc., for more than three years, and acquired and cultivated the substitute farmland within one year from the date of transfer of the previous farmland. As such, the income from the transfer of the previous farmland is subject to reduction of capital gains tax due to the land adjoining to self-farmland under Article 70 of the Restriction of Special Taxation Act, the instant disposition on a different premise should be revoked unlawfully

B. Key statutes

Attached Form is as shown in the attached Form.

C. Determination

1) According to Article 70(1) of the Restriction of Special Taxation Act (amended by Act No. 921 of Jan. 1, 2010) and Article 67(1), (2), and (3)1 of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 20620 of Feb. 22, 2008), “Where a person who has resided in the previous location of farmland for not less than three years and cultivated the farmland while residing in a new location of farmland for not less than three years after acquiring another farmland within one year from the date of transfer of the previous farmland, and the area of new acquired farmland is 1/2 of the area of farmland to be transferred or more of the value of transferred farmland is 1/3 or more of the value of the farmland to be transferred,” the tax amount equivalent to 100/100 of the transfer income tax on the transfer income accruing from substitute land of farmland shall be

2) The purport of the provision that reduces capital gains tax on the substitute land of farmland under the Restriction of Special Taxation Act is to protect a self-employed farmer and encourage agriculture by guaranteeing free substitution of farmland. Therefore, the subject of reduction or exemption shall be construed to limit the cases where the farmland acquired by the self-employed farmer and cultivated is to be substituted for the purpose of cultivation.

Therefore, the requirements for reduction or exemption of capital gains tax due to substitute land for farmland shall be the farmland. ② The former land and the newly acquired land shall be cultivated directly while residing in the previous land location for not less than three years and residing in the new land location for not less than three years in addition thereto. ③ The residence and cultivation shall begin within one year from the date of transfer of the previous land. ④ The period between the date of transfer of the previous land and the date of acquisition of the newly acquired land shall be within one year, and ⑤ The area of the newly acquired farmland shall be not less than 1/2 of the area of farmland and the value of the transferred farmland shall be not less than 1

In addition, the term "direct cultivation of farmland" is that a resident is engaged in the cultivation of the crops or the growing of perennial plants in his own farmland at all times (in the location and location of the farmer and farmland, in the vicinity of time) or who is engaged in the farming work at least 1/2 of his own labor (in the direct labor force of the farmer).

In addition, in order for the Plaintiff to have the capital gains tax on the income accrued from substitute land for farmland reduced or exempted due to the necessity for cultivation, the Plaintiff’s above assertion is required first to prove all the requisite facts (see, e.g., Supreme Court Decision 92Nu11893, Jul. 13, 1993).

3) In this case, we examine whether the Plaintiff was proved to have cultivated the previous farmland directly for three or more years while residing in the previous location of the farmland.

A) Facts consistent with or favorable to the Plaintiff’s assertion

According to each description of Gap evidence (including each number), the following facts, etc. may be recognized:

① In the farmland ledger, the Plaintiff is written as if the former farmland was self-fluored by the Plaintiff. ② The Plaintiff resided in the city of Si/Gun/Eup/Myeon having the same farmland as the previous farmland location, and is a distance equivalent to approximately 9km from the previous farmland to the Plaintiff’s domicile. ③ The receipt for issuance of the pesticide company B shall include the amount of KRW 210,000 in the year 2004, and the amount of KRW 130,000 in the year 205. ④ The strongCC stated that “The Plaintiff has cultivated the previous farmland directly by the Plaintiff, and the strongCC received KRW 150,00-250,000 in the farmland ledger in 204-207, and the Plaintiff shall be deemed to have owned the previous farmland and KRW 150,000 in the farmland ledger in the year 207, and the Plaintiff shall be deemed to have received KRW 25,00 in the farmland ledger.

B) Facts that do not comply with the Plaintiff’s assertion or disadvantageous

However, the following facts are also acknowledged in light of the evidence mentioned above and the statements mentioned in No. 2-1 and No. 2-2, and the purport of the whole pleadings.

① As of January 21, 2008, the Plaintiff owned farmland of a total of 4,098 square meters, including the part owned by his spouse as of January 21, 2008. ② The Plaintiff did not possess agricultural machinery, such as light season while residing in an apartment building. ③ The Plaintiff’s farmland owned by the Plaintiff is located in a mm-si Eup, whites, maths, and eust-dong. ④ From 1994 to 2008, the Plaintiff was working in a Mm livestock industry cooperative; and the annual salary of 2007 is KRW 88,707,000. ⑤ The Plaintiff’s direct cultivation of farmland of a total of 4,098 square meters, which is scattered in various places without any basic agricultural machinery such as light season, is an example. ② The Plaintiff asserted that the Plaintiff was aware at the time of the first request for pre-assessment review, but the Plaintiff prepared the first claim for memory at around 2004-207.

C) Sub-decision

In addition to the fact that there is no explanation as to how the previous farmland had been managed separately in the relation with the well-known accommodation, which is another co-owner, the evidence No. 15 and No. 17 cannot be easily admitted as evidence for the plaintiff's direct cultivation (a half or more of the regular or agricultural work by his own labor) of the previous farmland for not less than three years, and the above fact alone is insufficient to recognize that the plaintiff with the burden of proof alone proves all the above requirements No. 6 (a more than three years' own work) and there is no other evidence to recognize otherwise. According to the above facts of recognition, the fact that the plaintiff did not cultivate the previous farmland is recognized. Accordingly, the plaintiff's above argument of the plaintiff on the premise that the above requirements are proved or that the direct cultivation is insufficient, and the disposition of this case is legitimate.

3. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit as prescribed by law.