[ Court Ruling ] Gift Tax Imposed Based on Appraisal Three Months After Transaction... Court Rules "Unlawful"

Published 29 Sep.2025 16:01(KST)

[Court Ruling]

A court has ruled that the tax office’s decision to impose gift tax based on an appraised value calculated several months after a land transaction, treating it as the market price at the time of sale, is unjust. The rationale is that the condition of the land changed between the time of the transaction and the appraisal, making it impossible to regard them as having the same market value.

On July 18, the Seoul Administrative Court’s Division 4 for Administrative Cases (Presiding Judge Kim Youngmin) ruled in favor of the plaintiffs in a lawsuit (Case No. 2024GuHap57941) filed by three individuals, including Mr. A, against the heads of the Seocho and Gangnam tax offices, seeking to cancel the imposition of gift tax.

A court ruling has determined that the tax office's decision to impose gift tax based on an appraised value calculated several months after the land transaction, treating it as the market price at the time of sale, is unjust. Pixabay

[Facts of the Case]

The corporation controlled by the plaintiffs purchased land in Seoul in April 2020 for approximately 4 billion KRW (about 4 billion won), and completed the transfer of ownership registration in May. However, in an appraisal conducted in July of the same year for the purpose of securing a mortgage loan, the land was valued at approximately 7.2 billion KRW (about 7.2 billion won). The tax office treated this appraised value as the market price at the time of sale and imposed gift taxes of about 669 million KRW, 133 million KRW, and 436 million KRW on Mr. A and the other plaintiffs, respectively.

[Court’s Judgment]

The court determined that the value of the land had changed between the time of the transaction and the appraisal. Construction of a warehouse had been underway on the land since the end of 2019, with the completion rate increasing significantly from 2.4% in March 2020 to 46.3% in August of the same year. The appraisal company, in response to the court’s inquiry, stated that “there is a possibility of a change in the appraised value due to the progress of construction between April and July.” Furthermore, while the land was classified as forest land at the time of sale, the appraisal was conducted using standard land for factory sites as a comparison reference.

The court stated, “It is difficult to conclude that the appraised value as of July 2020 represents the market price as of the contract date in April 2020. Considering that the condition of the land changed due to the ongoing warehouse construction between the contract date and the appraisal date, and that the appraisal used standard land for factory sites despite the land being classified as forest land at the time of sale, the imposition of gift tax based on this appraised value is unlawful.”