Whether the act of transferring land owned for a long time in installments can be seen as real estate sales business

Although the land is not sold within the short period after its acquisition, it is sufficient to regard the land as the running of business with continuity and repetition of profit in light of the form, scale, frequency period, real estate transaction status, etc. of the transaction sold by lots after dividing and developing the land.

Article 19 (Business Income)

Article 34 (Scope of Real Estate Sale Business)

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

The Defendant’s imposition of global income tax of KRW 56,920,740, global income tax of KRW 19,48,240 for the year 2003, global income tax of KRW 19,48,240 for the year 2004, and the disposition of increasing or decreasing global income tax of KRW 28,457,120 for the year 2003, and global income tax of KRW 15,609,230 for the year 204 shall be revoked.

Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On January 11, 1973, the Plaintiff purchased and owned 01 ○○○○○○○○○○○ 3,435 m2 (hereinafter “the instant land”), 2,023m2 (hereinafter “the instant land”) of the same Dong on August 5, 1976, 197, and then divided the instant land into eight and six lots on June 20, 203, and divided the instant land into eight and six lots (hereinafter “the instant land”). From July 2003 to February 2004, the Plaintiff reported the transfer income tax to another person (hereinafter “the instant transfer”).

B. However, on the ground that this case’s transfer act constitutes a real estate sales business and its income constitutes not a transfer income but a business income, the Defendant separately determined and notified the Plaintiff of KRW 56,920,740 of global income tax for 2003 and KRW 19,48,240 of global income tax for 2004, and global income tax for 2004. On August 5, 2006, the Defendant added the above tax amount to global income tax for 28,457,120 of global income tax for 203, global income tax for 204, and global income tax for 609,230 of global income tax for 204 (hereinafter collectively referred to as “instant taxation disposition”).

C. On March 27, 2006 and August 8, 2006, the Plaintiff filed a request for review with the National Tax Tribunal. However, the National Tax Tribunal dismissed all of the Plaintiff’s request for review on November 17, 2006.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 and 2 (including several numbers), and the purport of the whole pleadings

2. Summary of the parties' arguments

A. The plaintiff's assertion

The plaintiff continued to do so for about 30 years after the acquisition of the land in this case, while trying to dispose of it for the purpose of the repayment of business debts, but it is merely selling the land in this case by dividing it into several lots for convenience of disposal because it is difficult to seek a purchaser with excessive size, and it does not constitute profit or developing and selling the land for business purpose. Thus, the transfer of this case does not constitute real estate sales business under the Income Tax Act, while the transfer of this case does not constitute the transfer of this case, and even under the circumstances, it argues that the taxation of this case imposes a comprehensive income tax, which is not a transfer income tax, on the ground that it

B. Defendant’s assertion

In regard to this, the Defendant asserts that the instant tax disposition is lawful, since the Plaintiff’s development of the land as stipulated in the General Rule 19-7(1)3 and (4) of the Income Tax Act (see the relevant Acts and subordinate statutes, e.g., attached Table 1.), is a land development well-known and repeated, in light of the fact that the Plaintiff increased the utility value of the land by dividing the instant land into about 13 lots of private housing and roads, and that the Plaintiff acquired or transferred real estate over about 30 times after 1981, other than the instant land.

3. Grounds for judgments; and

(a) Relevant statutes;

Article 19 (Business Income)

Article 34 (Scope of Real Estate Sale Business)

B. Ground of determination on the legitimacy of the instant taxation disposition

(1) First, Article 19-7 (1) 3 and (4) of the General Rules of the Income Tax Act, which the Defendant cited as the main basis of the instant taxation, merely provides administrative rules within the tax authority to interpret and enforce the meaning of “real estate sales business” under Article 19 of the Income Tax Act (see, e.g., Supreme Court Decision 2005Du5611, Feb. 8, 2007). Thus, it is impossible to determine whether the instant transfer constitutes real estate sales business.

(2) Article 19 of the Income Tax Act and Article 34 of the Enforcement Decree of the Income Tax Act

The instant taxation disposition should be determined by whether it conforms to the above law and the Enforcement Decree. Article 19(1)12 of the Income Tax Act provides for the income accrued from real estate sales business as one of the business income subject to income tax, and Article 34 of the Enforcement Decree of the same Act provides that real estate sales business refers to a building construction business and real estate supply business under the Korea Standard Industrial Classification. However, the Korea Standard Industrial Classification provides that real estate supply business refers to "business activities of selling and selling land, such as farms, housing sites, etc., which are directly developed and constructed under a contract to others", and does not specifically provide for whether the transaction of real estate constitutes real estate sales business where the transaction of real estate is specifically defined, the issue of whether the transaction of real estate constitutes real estate sales business, which is a taxation requirement for business income or is subject to capital gains tax should be determined by taking into account the transferor's acquisition and possession of real estate, whether the transaction of real estate was made, the scale and frequency of transfer, the degree of continuity of the transfer activities, etc., as well as whether it can be seen as continuous 2040.

4. Determination

(a) Facts of recognition;

(1) On June 20, 2003, the Plaintiff: (a) divided the instant land into 100 square meters or larger without changing its land category; (b) divided the instant land into 6 lots; (c) sold 3,291 square meters or more in total for 704,50,000 square meters among the said divided land, as indicated in the attached Table 2, for a period from July 2003 to February 2004; and (d) sold 3,000 square meters or more in total for 704,50,000 square meters (However, among the divided land on June 20, 2003, the instant land was divided into 01,00-1,000,000-1,000,000-1, 3,000-4, and 4,000-1,000 square meters or more, and 3,003-4,000 square meters or more, which is divided into 364,34, Dong-1.

(2) The instant land is located near a road as the vehicle passes, and a six-meter channel in width leading to the center was established as a result of the division of the said land, and each land divided into an area inside and outside 100 square meters was located on both sides of the said packing road in a form close to the square and was located on both sides of the said packing road, and two-ve houses are newly constructed on some of the above-mentioned divided lands.

(3) The Plaintiff was engaged in the direct wholesale business from around 1977 to the Jeju city with the trade name "○○", and the above business entity is a business entity that has received annual profits without any loss during the period from 1992 to 2005.

(4) In addition to the instant land from 1981 to February 2004, the Plaintiff acquired a large number of real estate including woodland, stock farm, orchard, and housing site in Jeju area over 30 times, and transferred part of them to others. In particular, the extent of half of the said transaction was during the period from 1998 to 2004.

(5) On January 9, 2004, the time of the transfer of this case, the Plaintiff established ○○ World Co., Ltd. with the purpose of housing construction on January 9, 2004, but was closed on June 30, 2005 when the sales did not occur.

(6) Meanwhile, on November 27, 2002, prior to the transfer of this case, the Plaintiff purchased KRW 489,60,000 on November 27, 200, 00 from Jeju-si ○○○○-7, 676.8 square meters. Around that time, the Plaintiff borrowed KRW 320,000,000 from ○ Bank on November 4, 2002, however, on June 2003, the transfer of this case had already been partially repaid the principal and had only 169,410,000 loan obligations.

[Ground of recognition] Gap evidence Nos. 6 through 12, 17 through 23 (including each of these numbers), Eul evidence Nos. 6, 10-2, 13-2, 3-3, on-site inspection results and the purport of the whole pleadings by the court of first instance

B. Determination as to whether the instant transfer constitutes a real estate sales business

살피건대, 원고가 이 사건 토지를 약 30년 가량 보유하여 왔고 이 사건 토지의 규모 및 가액에 비추어 보면 매수자를 찾기 어려워 매도를 위하여 불가피하게 이 사건 토지를 분할하였다는 원고의 주장을 전혀 이해하지 못할 바는 아니지만, 앞서 인정한 사실에 의하여 알 수 있는 다음과 같은 사정, 즉 ① 이 사건 양도행위가 금박하거나 부득이한 사정에 의하여 이루어진 것이라고 보이지는 아니하고, 원고가 이 사건 토지를 일체로 처분하기 위하여 부동산 중개업자에게 매도를 의뢰한 적이 있다는 정황도 이 사건 변론과정에 전혀 드러나 있지 아니한 점(원고는 이 사건 토지를 분할 매도한 이유에 관하여, 소장에서는 위 '○○직물'에 근무하던 종업원들의 급여 등을 지급하기 위하여 320,000,000원을 대출받았는데 이를 상환하기 위하여 이 사건 토지를 매도하였던 것이라고 주장하였다가, 다시 신사옥 건립 부지로서 위 ○○동 대지를 구입하면서 대출을 받게 되었고 그 대출금 상환과 사옥신축에 사용하기 위하여 이 사건 토지를 신속하게 처분할 필요가 있었기 때문이라고 변경하여 주장하였으나, 원고가 운영하던 위 사업체는 매년 수익을 창출하는 사업체로서 직원들에게 급여 등을 지급하지 못하고 있었다는 주장은 믿을 수 없고, 원고가 제출한 갑 제18호증의 기재만으로는 원고가 대출금을 어떠한 용도로 사용하였는지 전혀 알 수 없으며 달리 특별히 대출금을 상환하여야 할 급박한 사정이 있었다고 보이지는 아니한다. 오히려 이 사건 양도행위 이전에 이미 대출원금 중 150,590,000원이 변제되었고, 현재까지도 신사옥의 착공이 있었는지 여부에 관하여 원고의 아무런 주장 입증이 없다), ② 이 사건 토지의 분할이 지목 변경없이 이루어지기는 하였으나 이 사건 토지는 자동차가 통행하는 대로의 인근에 위치한 토지인데다 원고가 그 중심부를 관통하는 폭 6m 포장도로를 개설하고 토지를 100평 내외의 정방형에 가까운 형태로 분할함으로써 각 분할된 토지들은 주택을 신축하기에 적합한 상태에가 되었고 실제로 이후 그 중 2필지 지상에 주택이 신축된 점, ③ 직물도매업에 종사하던 원고가 이 사건 양도행위 무렵 주택건설을 목적으로 하는 법인을 설립하였던바 비록 그 영업활동이 이루어지지는 아니하였으나, 이에 관하여 피고는 원고가 이 사건 토지를 분할하여 주택신축에 적합한 형태로 조성한 다음 각 필지 지상에 주택을 신축하여 판매할 목적을 가지고 있었다면서 위 법인 설립이 이 사건 토지에 대한 개발행위의 연장선상에서 이루어진 것이라는 취지로 주장하고 있고 이에 대하여 원고는 법인 설립의 경위나 목적에 관하여 아무런 설명도 하지 아니하고 있는 점, ④ 이 사건 토지의 규모와 매도가액 및 매매횟수가 적지 아니한 점 등과 아울러 그 동안 원고가 취득 및 양도한 부동산의 종류와 거래의 횟수 등을 종합적으로 고려하여 보면, 비록 원고가 이 사건 토지를 취득한 후 단기간 내에 매도한 것은 아니라 하더라도, 앞서 본 바와 같이 잇 ㅏ건 토지를 분할하여 주택 신축이 용이하게 개발한 다음 이를 필지별로 매도한 거래의 태양이나 규모, 횟수, 기간 및 원고의 부동산 거래실태 등에 비추어 볼 때 이 사건 양도행위는 수익을 목적으로 한 계속성과 반복성이 있는 사업 활동의 영위로 보기에 충분하고 그로 인한 소득은 사업소득에 해당한다 할 것이므로 결국 이 사건 과세처분은 적법하다(피고의 이 사건 과세처분이 재산권에 대한 지나친 규제로 여겨질 수도 있으나, 이는 원고로 하여금 분할매도 자체 또는 그로 인한 수익 취득을 금지하는 것이 아니고 단지 이 사건 양도행위가 부동산매매업에 해당할 경우 사업자로서 원고가 얻은 수익에 대하여 세금을 부과하는 것일 뿐이다).

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is unfair with different conclusions, so it is revoked by the defendant's appeal and dismissed the plaintiff's claim. It is so decided as per Disposition.

[ Jeju District Court Decision 2007Guhap126 ( February 15, 2008)]

1. The Defendant’s imposition of global income tax of KRW 56,920,740, global income tax of KRW 19,48,240, global income tax of KRW 2004, global income tax of KRW 28,457,120, global income tax of KRW 15,60,230, which belongs to the Plaintiff on January 5, 2006, and the disposition of increasing or decreasing the global income tax of KRW 28,457,120, global income tax of KRW 203, August 5, 2006, shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On January 10, 1973, the Plaintiff purchased and owned 3,435 square meters of the orchard of ○○○-si, ○○-si (hereinafter referred to as “one parcel of land”), and 2294 square meters of the orchard of 2294 (hereinafter referred to as “the two lands of this case”) around August 4, 1976, and reported the transfer income tax to the Defendant on March 20, 203, the Plaintiff divided the instant land into 8 and 2 lots of land (hereinafter referred to as “the instant land”) into 6 lots of land around March 20, 203, and divided the said land into 8 and 6 lots of land from July 2003 to February 204 (hereinafter referred to as “the instant transfer act”).

B. However, on the ground that the instant transfer act constitutes a real estate sales business rather than a transfer income, the Defendant issued a notice to the Plaintiff on January 5, 2006 of global income tax of KRW 56,920,740, global income tax of KRW 19,48,240 for the year 2003, and global income tax of KRW 19,48,240 for the year 2004. On August 5, 2006, the Defendant added the above tax amount to global income tax of KRW 28,457,120 for the year 203, global income tax of KRW 15,609,230 for the year 204 (hereinafter collectively referred to as “instant tax disposition”).

C. On March 27, 2006 and August 8, 2006, the Plaintiff filed a request for review with the National Tax Tribunal. However, the said Tribunal dismissed all of the Plaintiff’s request for review on November 17, 2006.

[Ground of Recognition] Facts without dispute, Gap evidence 1 to 4, Eul evidence 1 to 2 (including each number), and the purport of the whole and part of the evidence of Nos. 1 to 2 (including each number)

2. Summary of the parties’ assertion

A. The plaintiff

After the Plaintiff acquired the instant land, it was intended to dispose of it in order to repay its business debts in a wrusium continuously for about 30 years, but it was difficult for the Plaintiff to seek the purchaser due to excessive increase in the size, and it was only sold in lots without changing the land category of the instant land for the convenience of disposal, and it did not develop marginal profits or develop and sell real estate for business purposes. Thus, the income gained by the Plaintiff as the instant transfer act should be deemed as capital gains under Article 94(1) of the Income Tax Act. Accordingly, the instant taxation is unlawful since the Defendant imposed comprehensive income tax, which is not capital gains tax, by deeming it as business income.

B. Defendant

As long as the Plaintiff sold the instant land by dividing the instant land into 13 lots of private residential land and road at approximately 100 square meters, it shall be combined with the real estate sales business, which is part of the development activities of the land as provided by the General Rule 19-7(1)3 and (4) (see the relevant Acts and subordinate statutes 1.) of the Income Tax Act (see the content thereof). In addition, since the Plaintiff acquired or transferred real estate over about 30 times after 1981, other than the instant land, it can be deemed that the instant transfer act has continuity and repetition. Therefore, the instant taxation is lawful.

3. Grounds for determination

(a) Relevant statutes;

Attached Form 1.

(b) understanding of general rules 19-7(1)3 and (4) of the Income Tax Act;

(1) As seen earlier, the Defendant cited the above general provisions as the main basis of the instant taxation disposition, and the review and decision by the National Tax Tribunal seems to be based on the above provisions (Article 4-2(6) of the National Tax Tribunal). In other words, the Plaintiff’s act of transferring the instant land by dividing it into 14 lots constitutes “development of land” under the above general provisions, and thereby, should be evaluated as “business of real estate sales” under the Income Tax Act. Such assessment by the Defendant seems to be premised on the above general provisions as a legal order, which itself has its own normative power.

C. Determination of this case: The meaning of Article 19 of the Income Tax Act and Article 34 of the Enforcement Decree of the Income Tax Act

(1) The legality of the instant taxation disposition depends on the determination as to whether it conforms to the above law and the Enforcement Decree. Article 19(1)12 of the Income Tax Act provides for the income accrued from real estate sales business, which is one of the business income subject to income tax, as prescribed by the Presidential Decree, and Article 34 of the Enforcement Decree of the same Act provides that real estate sales business refers to the building construction business and the real estate supply business under the Korean Standard Industrial Classification. However, the Korean Standard Industrial Classification provides that the real estate supply business refers to the "industrial activities of selling and selling buildings, etc. constructed by granting a contract to the land of the farm, housing site, etc. and others, which are directly developed," but does not specifically provide for the operation of real

(2) Ultimately, whether the transaction of real estate constitutes a real estate sales business, which is a taxation requirement of business income, or is subject to transfer income tax, shall be determined according to ordinary social norms, considering the acquisition and holding status of real estate, existence of protocol, size of transfer, frequency, mode, other party, etc. of real estate, and whether the transfer is for profit-making purposes and the continuity and repetition of the degree that it can be seen as business activity. In making such determination, not only for the relevant transferred real estate, but also for the entire real estate owned by the transferor, but also for all the circumstances before and after the time the transfer took place (see, e.g., Supreme Court Decisions 2004Du3700, Apr. 24, 2001; 9Du5412, Apr. 24, 2001). In sum, whether the Plaintiff’s act constitutes a land development activity cannot be justified merely because it constitutes a "real estate development activity." The Plaintiff’s act of taxation in this case can be seen as a "business profitability" in light of the above legal principles.

(d) Facts of recognition;

(1) Around January 10, 1973, the Plaintiff purchased each land of this case, adjacent to the land of this case on or around August 4, 1976, and developed each of the land of this case into 100 square meters, with a scale inside and outside 100 square meters without changing the land category on or around June 20, 200, divided the land of this case into 8 lots, and divided the two land of this case into 6 lots, and sold 30,291 square meters in total from July 2003 to February 2004 as shown in the annexed Table 2, and divided 30,450,000 square meters in total into 7,450,000 won in total, and 00,001 Dong 239-8,316 square meters in 20,000 to 40,000 square meters in around 29, 204.

(2) The official land price prior to the subdivision of the instant land (based on January 1, 2003) is KRW 51,300 per square meter; the official land price after the subdivision (based on July 1, 2003) is KRW 50,300; and the official land price (based on July 1, 2003) of the land divided from the instant land is approximately KRW 45,000 to KRW 50,000. In addition, the official land price prior to the subdivision of the instant two land (based on January 1, 2003) and the official land price after the subdivision (based on January 1, 203) is equal to KRW 53,00 per square meter; and the official land price of the land divided from the instant two land (based on January 1, 2004) is about KRW 50,500,000 per square meter.

(3) As shown in the attached Table 3. The Plaintiff acquired real estate equivalent to a total of 13,292 square meters from March 1998 to February 2, 2004, including the previous and forest land, etc., six times from around March 198 to around February 2, 200, and transferred real estate equivalent to a total of 8,595 square meters over seven occasions. Since 1981, there was about 41 square meters (including the instant transfer act). From around 23 times in the transaction, approximately 23 times in the transaction had acquired real estate and owned it until now, and there was no sale of real estate acquired within a short period of less than one year.

(4) On the other hand, around November 27, 2002, the Plaintiff purchased 48,960,000 square meters of 00,000,000,001, 571-7,000,000,0000 won. In the process, around November 4, 2002, 320,000 won was loaned from ○ bank.

(5) Around January 9, 2004, around the time of the instant transfer, the Plaintiff established ○○○ World Co., Ltd. (business type: housing construction), but closed on June 30, 2005, and there was no business performance at all.

[Ground of recognition] Evidence Nos. 6 through 23 (including each number), Eul evidence Nos. 6, 10-2, each statement of witness Nos. 10-2, each testimony of the new witness ○○○ and Kim○○, the result of the on-site inspection by this court, and the purport of the whole pleadings

E. Determination as to whether the instant transfer constitutes a real estate sales business

In light of the above legal principles, it is difficult to view that the Plaintiff’s act of sale of the instant land was 70,000 won or less for the purpose of the sale of the instant land, on the ground that the Plaintiff’s act of sale of the instant land was 100,000 won or less for the purpose of the sale of the instant land, and thus, it was difficult to view that the Plaintiff’s act of sale of the instant land was 70,000 won or less for the purpose of the sale of the instant land, based on the following circumstances: (i) the Plaintiff’s act of sale of the instant land, which was 10,000 won or less for the purpose of the sale of the instant land, was 10,000 won or less for the purpose of the sale of the instant land; and (ii) the sale price of the instant land was 10,000 won or more for the purpose of the sale of the instant land, and thus, it is difficult to view that the sale price of the instant land was 10,000,000 won or more.

4. Conclusion

If so, the plaintiff's claim seeking the revocation of the taxation disposition of this case is reasonable, and it is so decided as per Disposition.

1.

public official law, order of law,

○ Income Tax

Article 19 (Business Income)

(1) Business income shall be the following incomes generated during the relevant year:

12. Incomes accruing from real estate sales business determined by the Presidential Decree;

○ Enforcement Decree of Income Tax

Article 34 (Scope of Real Estate Sale Business)

For the purpose of Article 19 (1) 12 of the Act, the term “real estate sales business as determined by the President” means the building construction business (limited to the case of self-construction and sale of a building) and real estate supply business under the Korean Standard Industrial Classification: Provided, That this shall not include the housing construction and sales business under Article 3

○ Korea Standard Industrial Classification

Supply of Real Estate

The term “industrial activities” means industrial activities that sell and sell land, such as farms, housing sites, industrial sites, etc., and buildings, etc. constructed by being awarded contracts to others. It includes resale without leasing or operating the purchased real estate.

○ Common Rules of Income Tax

19-7 [Classification of Business Types of Real Estate Sale Business, etc.]

(1) The scope of real estate trading business under Article 34 of the Decree shall be as follows:

1. Where real estate is sold or purchased at least once within a taxation period of one tax under the Value-Added Tax Act for the purpose of business by indicating the sale or purchase (including the cases of newly constructing and selling a building) of real estate or its brokerage for the purpose of business;

3. Where land is developed and sold in installments as a residential site, industrial complex, commercial building, cemetery, etc.;

(4) The term "development of land in the classification of real estate trading business" means all acts that cause a rational and efficient enhancement of the utility value of the relevant land by suspending, dividing, creating, altering, etc. a certain land.

2. The mark;

Location (○01 Dong)

Area of a square meter;

Transfer Date

Transfer Amount

Jinay

2399-1

311

November 4, 2003

73 million won

2399-4

332

January 31, 2004

77 million won;

2399-5

308

August 11, 2003

70 million won;

2399-6

421

August 11, 2003

9,15 million won

2399-7

656

December 3, 2003

80 million won;

2294

425

September 3, 2003

86 million won

2294-1

13

July 4, 2003

293-3 Exchange with land

2294-2

347

February 2, 2004

6,8250,000

2294-6

443

February 2, 2004

8,7750,000

2294-5

348

September 3, 2003

70 million won;

Total

750,000,000 won (per m214,000 won)

3.

o In the future:

Location

Land Category

Area of a square meter;

Date of acquisition

Transfer Date

Grounds

○○1 Dong 2394-4

50

92

July 1, 1980

November 28, 2003

○○1 2393-1 Transfer to an access road to land

○○ 1664-1

?Electric field:

2,254

December 30, 1984

February 4, 2005

Sale to ○○-dong 1659-1 land owners without access roads to the land

○○ 1664-2

【Forest & orchard】

2,496

○○ 940-1

Forest land

943

may 13, 1998

July 28, 1999

Sale (Incorporation into ○○) due to the acquisition of public land by consultation;

○○ 940-2

Forest land

1,472

February 15, 2001

○○ 2684

Forest land

1,33

June 22, 1999

September 22, 2003

Sale as a parking lot site of a neighboring art gallery;

○○1 Dong 2293-6

Forest land

5

June 20, 2003

January 14, 2005

○ Incorporation into part of 2399-8 contributed to roads at ○○ City.

○○ 757

Forest land

4,744

February 27, 2003

Current Possession

Request for purchase by the owner of the above land who is the blind land

○○ 833

Forest land

4,795

February 2, 2004

Current Possession

Request for purchase by the owner of the above land who is the blind land