Where a member of a reconstruction association provides an existing house or site to the association and transfers the right of sale acquired, requirements to be exempted from capital gains tax as a transfer of one house for one household.

Article 89 subparagraph 3 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005); Article 154 (1) and Article 155 (16) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18044 of Jun. 30, 2003) (see current Article 155 (17))

Supreme Court Decision 2004Du9456 Decided March 11, 2005 (Gong2005Sang, 607) Supreme Court Decision 2006Du16397 Decided February 22, 2007

Plaintiff

Director of the District Office

Seoul High Court Decision 2006Nu18968 decided May 3, 2007

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

Article 89 (3) of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005) provides that "one house for one household as prescribed by the Presidential Decree and a member of a reconstruction association under the Urban Redevelopment Act or of a reconstruction association under the Housing Construction Promotion Act (limited to an existing house under Article 34 of the Urban Redevelopment Act or a reconstruction association under Article 334 (1) of the Housing Construction Promotion Act as of June 30, 2003; hereinafter referred to as the "former Enforcement Decree") shall not be subject to any transfer income tax." Article 154 (1) of the former Enforcement Decree of the Income Tax Act provides that "in case where one household has one house in Korea as of the transfer date, and the ownership period of the house in question is more than 3 years (in part, a period of residence is 1 year or more), it shall be exempted from any transfer income tax." Article 155 (16) of the former Enforcement Decree of the Income Tax Act provides that "in case where the existing house is removed as of another existing house as of Article 15 (14).

In light of the legislative purport, legislative background, details of regulations, and relevant Acts and subordinate statutes of Article 155 (16) of the former Enforcement Decree, in case where a member of a reconstruction association transfers a sale right acquired as a result of the provision of an existing house or site and the approval of its business plan to the relevant association, there is no other house at the time of transfer of a sale right in order to be exempted from transfer income tax pursuant to Article 155 (16) of the former Enforcement Decree, and it is not required that one household should meet the non-taxation requirement under Article 154 (1) of the former Enforcement Decree as of the date of approval of the business plan (see Supreme Court Decisions 2004Du9456, Mar. 11, 2005; 2006Du16397, Feb. 22, 2007, etc.).

In the same purport, the court below acknowledged that the plaintiff acquired and resided in the old house on May 16, 1985 and Incheon apartment on August 20, 199, and approved a rebuilding project plan for the old house on April 28, 2001, the plaintiff transferred Incheon apartment on June 5, 2002 but transferred the new house on December 12, 2002 after acquiring the new house in this case and transferring the ownership of the new house in this case acquired on June 29, 2003. The plaintiff did not own any other house except the new house in this case for substitute acquisition at the time of transferring the new house in this case. The plaintiff's right to sell the new house in this case meets the requirements of residence for three years or more as of the date of approval of the business plan for the new house in this case, and the sale of the new house in this case is not subject to tax exemption under the provisions of Article 15 (1) of the former Enforcement Decree of the Income Tax Act. The court below's judgment is just in light of the legal principles and the grounds for appeal.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Ill-sook (Presiding Justice)