It is appropriate to exclude special long-term holding deduction from land excluded from non-business land.

Since the land cultivated by the plaintiff for not less than 8 years can not be seen as land for non-business purposes, it cannot be viewed as land that is inherited or donated by the relevant lineal ascendant.

Article 95 of the Income Tax Act

2017Gudan286 Revocation of Disposition of Imposing capital gains tax

KimA

BB Director of the Tax Office

April 28, 2017

May 12, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 18,534,770 against the Plaintiff on August 1, 2016 is revoked.

1. Details of the disposition;

(1) On April 1, 1981, the registration of ownership transfer (the cause of the registration is February 1, 1974) in the name of the Plaintiff was completed on April 1, 1981 with respect to DDR (the Plaintiff’s father, the Plaintiff’s father, and the Plaintiff’s death on November 29, 195) as DDR, DDR No. 40-10, 1597 square meters (hereinafter referred to as “refinal land”) owned. The registration of ownership transfer in the name of the Plaintiff was originally completed on February 1, 1974 with respect to the same 40-9 square meters as KimF (the Plaintiff’s father, the Plaintiff’s father, and the Plaintiff’s two parcels) and 40-1,817 square meters (hereinafter referred to as “the land of this case”) under the name of the Plaintiff on February 28, 1984 (the registration of ownership transfer was completed on February 29, 1984).

B. On October 14, 2015, the Plaintiff sold GG’s neighboring land and the instant land to GG in total at KRW 283,00,000,000, and completed the registration of transfer of ownership in the name of GG (the grounds for registration, September 16, 2015) under the DD District Court’s registration office No. 242659 on each of the said land.

On December 29, 2015, the Plaintiff reported and paid KRW 41,893,452 of the transfer income tax for the year 2015 by applying the special deduction for long-term holding of land to the Defendant on December 29, 2015.

In August 1, 2016, the Defendant issued the instant disposition to the Plaintiff, on the ground that the instant land constitutes land for non-business subject to exclusion from the special long-term holding deduction, thereby excluding the special long-term holding deduction for the transfer income of the instant land (i.e., the final tax amount of KRW 58,148,905 + additional tax of KRW 1,624,290 + additional tax of KRW 1,624,290 + additional tax of KRW 667,583 – additional tax of KRW 41,906,00 for already paid tax amount of KRW 41,90,00, and less than KRW 667).

Facts that there is no dispute over the basis of recognition, Gap evidence 1, Gap evidence 6-1, 2, Gap evidence 9, Eul evidence 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

(1) According to Article 95(2) of the former Income Tax Act (amended by Act No. 13558, Dec. 15, 2015; hereinafter the same), the transfer income of land the holding period of which is at least three years is calculated by deducting the special long-term holding deduction amount from gains on transfer (i.e., transfer value - necessary expenses).

According to Article 104-3 (1) and (2) of the former Income Tax Act, (1) farmland for the period prescribed by Presidential Decree during which the owner owns the relevant land, as prescribed by Presidential Decree, shall be deemed land for non-business use in principle, while farmland for which the owner does not reside in the farmland within the period prescribed by Presidential Decree, or which is not cultivated by himself/herself, shall not be deemed land for non-business use.

Therefore, Article 168-14 (3) 1-2 of the former Enforcement Decree of the Income Tax Act excludes "land directly cultivated by a lineal ascendant or his/her spouse while residing in the location of land prescribed by Ordinance of the Ministry of Strategy and Finance for not less than eight years, which is inherited or donated by the relevant lineal ascendant or his/her spouse [excluding land in urban areas (excluding green belt areas and development restriction zones) under the National Land Planning and Utilization Act at the time of transfer] from land for non-business.

Luxembourg The Plaintiff: (a) on January 30, 1973, the land of this case was replaced by farmland improvement around 1981; (b) on February 1, 1973, the deceased KimCC, the father of the Plaintiff purchased 2/3 shares of the land before replotting from OO, and transferred the Plaintiff’s title trust in the future on February 1, 1973 (at that time, KimF had graduated from Seoul University and carried out work in Seoul) on the land of this case (at that time, KimF had cultivated the land located at x 580 square meters away from 10 meters, and the rest of 1/3 shares were cultivated by GF while owning 1/50 shares in the land of this case (at that time, the land of this case was divided into GF, but in fact, the land of this case was divided into 1/100). The Plaintiff’s ownership transfer registration should not be cancelled on the same ground as the Plaintiff’s previous 2/300 shares in the land of this case, 9.

In order to be excluded from non-business land even under the above related laws and regulations, "the land directly cultivated by the lineal ascendant residing in the location of the land prescribed by Ordinance of the Ministry of Strategy and Finance for not less than eight years, and the land inherited or donated by the relevant lineal ascendant." As seen earlier, the land of this case is originally registered as the ownership transfer registration (sale on February 20, 1984) in the Plaintiff's future on February 28, 1984, and the evidence submitted by the Plaintiff alone is insufficient to recognize it. Thus, the disposition of this case is legitimate, and the Plaintiff's assertion of grounds for appeal is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed for lack of reason.