Tax Office Calculated Gift Tax Using Land Value Three Months After Purchase... Court Orders Cancellation

"Construction Progress and Land Use Changes Not Reflected"

A court has ruled that the tax office's decision to calculate gift tax based on the appraised value of land three months after its purchase was unlawful.

According to the legal community on September 29, the Seoul Administrative Court’s Division 4 for Administrative Cases (Presiding Judge Kim Youngmin) recently ruled in favor of the plaintiffs in a lawsuit filed by three individuals, including Mr. A, seeking to overturn the gift tax assessments imposed by the heads of the Seocho and Gangnam Tax Offices.

Mr. A and others purchased the land in April 2020 for 4 billion won and completed the transfer of ownership registration in May of the same year. However, in July-three months later-the tax office recognized the appraised value of 7.2 billion won, determined by an appraisal firm, as the market value at the time of the transaction. As a result, the tax office imposed approximately 670 million won in gift tax on Mr. A, 130 million won on Mr. B, and 430 million won on Mr. C.

The plaintiffs argued that “the value of the land changed significantly after the transaction due to the construction of a new warehouse, which greatly increased the construction progress rate. It is unfair to ignore this and regard the July appraised value as the market value in April.” In fact, the construction progress rate rose from 2.4% in March 2020 to 46.3% in August. The appraisal firm also responded to a court inquiry, stating that “the appraised value may vary depending on the progress of construction and changes in the land’s characteristics.”

The court stated, “The appraisal conducted three months after the contract was based on the changed condition of the land due to ongoing construction and other factors, so it cannot be regarded as the market value at the time of the transaction,” siding with the plaintiffs.

The court further pointed out, “At the time, the land was classified as forest land, but the appraisal was based on its use as factory land. The appraisal firm also acknowledged that the appraised value could vary depending on the progress of construction and changes in the land’s characteristics.”

The court concluded, “This gift tax assessment was based on an incorrect evaluation and is therefore unlawful,” and upheld the plaintiffs’ claims.

This content was produced with the assistance of AI translation services.