If a sales contract is terminated, the sales contract becomes null and void, and the disposition to impose capital gains tax is illegal.

If a sales contract is terminated by agreement, the sales contract is retroactively null and void. Therefore, the disposition imposing capital gains tax on the seller on the premise that the seller has income from the transfer is illegal.

Article 45-2 of the Framework Act on National Taxes

Suwon District Court 2016Guhap60813 revocation of revocation of capital gains tax rectification

AA

00. Head of tax office

October 25, 2016

November 22, 2016

1. The Defendant’s disposition rejecting to rectify capital gains tax against the Plaintiff on June 24, 2015 is revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On June 30, 1998, the Plaintiff acquired 2,938.5 shares of 5,877 percent among 00,000 00,000 00-3 2,938 m2,938 m2 (hereinafter “instant land”). On March 9, 2010, the Plaintiff acquired the remaining shares of the said land.

B. On July 2, 2010, the Plaintiff entered into a contract to transfer 1,980/2,938 of the instant land to Kima for KRW 240,174,00 (hereinafter referred to as "sale contract") and completed the registration of ownership transfer for the said shares due to the said sale in the name of Kima on the 14th of the same month, and on November 5, 2010, entered into a contract to transfer 958/2,938 of the said land to Kimb for KRW 116,00,000 (hereinafter referred to as "B sale contract"), and completed the registration of ownership transfer for the said shares due to the said sale in the name of KimB on the 15th of the same month.

C. On November 24, 2010, the Plaintiff reported the transfer income tax amount to the Defendant as KRW 44,744,525 in relation to the sales contract, and KRW 13,681,908 in relation to the sales contract.

D. On May 1, 2011, the Defendant notified the Plaintiff of each increase of the transfer income tax for the year 2010 related to the sales contract as KRW 47,996,260 (including additional tax), and ② August 12, 2011, the transfer income tax for the year 2010 related to the sales contract was 26,259,130 won (including additional tax). Accordingly, the transfer income tax for each sales contract of this case was 74,25,390 won in total.

E. On March 31, 2015, the Plaintiff: (a) rescinded each of the instant sales contracts with Kima and Kimbb; and (b) drafted a revocation certificate (Evidence A 6-1 and 2) under the name of Kima and Kimbb, each of which was agreed to cancel each of the above registrations of transfer; and (c) accordingly, on April 10, 2015, each of the above registrations of transfer in the name of Kima and Kimbbb was cancelled on the grounds of the cancellation of each of the above agreements.

F. On May 19, 2015, the Plaintiff filed a request for correction with the Defendant for reduction of KRW 74,255,390 for the transfer income tax belonging to the year 2010 on the grounds of the rescission of agreement on each of the instant sales contracts (hereinafter “instant request for correction”). However, the Defendant cannot be deemed to have failed to transfer from the beginning considering the circumstances such as the cancellation of agreement on each of the instant sales contracts after four years from the date of imposition, even if the Plaintiff could immediately rescind each of the instant sales contracts on the grounds of the remainder payment.

On June 24, 2015, the Plaintiff notified the Plaintiff that the instant claim for correction should be dismissed (Evidence A No. 9, hereinafter referred to as “instant disposition”).

G. On July 23, 2015, the Plaintiff appealed to the Tax Tribunal, but the Tax Tribunal decided to dismiss the claim on November 4, 2015.

Facts having no dispute over recognition, Gap's evidence Nos. 1, 2, 6, 8, 9, 14 (including paper numbers), Eul's evidence Nos. 1, 2, and 3, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff’s failure to pay the remainder of the sales contract of this case by Kima and Kimbb, the purchaser of the land of this case, and returned all the sales amount received from Kima and Kimb. The effect of each sales contract of this case is retroactively extinguished, and thus, it cannot be deemed that capital gains have been generated to the Plaintiff. Thus, the disposition of this case made by the Defendant against the Plaintiff is unlawful on a different premise.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) On July 2, 2010, the Plaintiff entered into a sales contract that transfers 1,938/2,938 of the instant land to KRW 240,174,00 (the date of the payment of the price: July 2, 2010). On November 5, 2010, the Plaintiff entered into a sales contract that transfers 958/2,938 of the same land to KRW 116,00,000 (the date of the payment of the price, November 9, 2010), and ② the sales contract that transfers 958/2,938 of the same land to Kimb (the date of the payment of the price, November 9, 2010). The said sales contract contains the following descriptions in relation to the method of payment of the price:

○ The purchaser shall take over KRW 81,518,040 equivalent to 958/2938/2,000 out of the principal amount of KRW 350,000,000,000 (the maximum amount of claims) of the amount of collateral security established on the instant land, which is KRW 350,000,000,000,000,000,000

2) On November 18, 2010, the Plaintiff received KRW 248,828,650,000 from Kimbb, Kim 00 bank account of Kimb, which was deposited by cashier's checks, as part of the purchase price of each of the instant sales contracts, and the Plaintiff paid the above cashier's checks to the Saemaul Depository of 00,000,000 won to repay the above cashier's checks. On the same day, on March 10, 2010, the registration of the establishment of the mortgage of the Saemaul Bank of 00,000,000,000 won due to the mortgage contract as of March 10, 2010, was cancelled.

3) However, since Kima and Kimbb did not pay the Plaintiff the balance of the instant land, the Plaintiff urged each of the remainder of the instant sales contract to the Kima and Kimbb on March 16, 2011, and on December 18, 2012, Kima and Kimb to pay ( KRW 71,692,040, KRW 34,481,960, KRW 3481,960) with respect to each of the instant sales contract, and requested the cancellation of each of the instant sales contract on March 3, 2015 on the grounds that the balance was unpaid to Kima and Kimb, and on March 31, 2015, the Plaintiff agreed to cancel each of the instant sales contract with Kima and Kimb and Kimb, and the Plaintiff settled the interest and penalty with respect to the sales amount paid KRW 204,270,00.

4) Thereafter, on April 30, 2015, the Plaintiff remitted KRW 18,481,960 to Kima, and KRW 81,518,040 to Kimbb, respectively. On May 4, 2015, the Plaintiff additionally remitted KRW 150 million to Kima, and fully returned the sales price for the instant land.

5) Meanwhile, on December 15, 2011, the Plaintiff leased the instant land to Kim C with the rent of KRW 5 million and the lease period of KRW 60 million, and Kim C is growing ginseng on the said land.

Facts without any dispute, Gap's statements, 1 through 7, 13, 16 through 19 (including paper numbers), the purport of the whole pleadings.

D. Determination

Even if a sales contract for real estate was concluded and the price for the transfer was received in full, if the sales contract was terminated by dispute arising in connection with the performance of the sales contract, the above sales contract becomes retroactively null and void, and thus, the disposition imposing capital gains tax on the seller on the premise that the seller had any income arising from the transfer of the property is unlawful (see Supreme Court Decisions 2014Du44076, Feb. 26, 2015; 83Nu91, Apr. 26, 1983).

The plaintiff on July 2, 2010 to Kima on July 2, 2010 1,938/2,938 of the land in this case

(2) On November 5, 2010, the Plaintiff was paid KRW 250 million as part of the purchase price of each of the instant sales contracts, such as (i) transfer of KRW 240,174,000 to Kimb, Kimb, and (ii) transfer of KRW 958,938 of the same land to KRW 116,00,00; and (iii) receipt of KRW 248,828,650 from Kimb, Nov. 18, 2010 from KRW 248,828,650; and (iv) thereafter, the Plaintiff failed to receive the remainder of the sales price of this case to Kima and Kimb, even though it urged the Plaintiff to pay the remainder of the sales price of this case to Kimb, and the Plaintiff was paid KRW 405,00,000 on March 31, 2015; and (v) the Plaintiff was paid KRW 204,2705,000,815.

According to the above facts of recognition, each of the instant sales contracts was lawfully rescinded due to the unpaid balance of Kima and Kimb, and it is difficult to view the termination of the agreement as a false conspiracy for the purpose of evading tax claims as alleged by the Defendant. Therefore, since each of the instant sales contracts retroactively lost its validity, the instant disposition that was based on the premise that the Plaintiff had income from the transfer of the instant land was unlawful.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is decided as per Disposition.