A married couple who inherited an apartment from their parents and paid gift tax based on the officially assessed price, saying there was no transaction for six months from the gift date, will have to pay additional tax calculated on the actual transaction price.
The Seoul Administrative Court said on the 30th that on Jan. 30 it dismissed all claims by a married couple, A and B, in their lawsuit seeking to cancel the gift tax assessment imposed by the head of the Seongdong Tax Office.
B's father, C, gifted one apartment in Seongdong-gu, Seoul, to the couple A and B on Aug. 2, 2022. The equity shares were one-third for A and two-thirds for B. The couple reported 1.106 billion won, the apartment's officially assessed price, as the standard market price to the Seongdong Tax Office and paid gift tax of 17.78 million won for A and 39.44 million won for B.
The Seongdong Tax Office confirmed that another unit in the same complex as the couple's inherited apartment was sold for 1.455 billion won on Mar. 6, 2021. The Evaluation Review Committee of the Seoul Regional Tax Service judged this price to be the market value as of the gift date. Based on this, in Sept. 2023 the tax office assessed gift tax of 24.5 million won for A and 45.03 million won for B. The additional amounts due are 6.72 million won for A and 5.59 million won for B, totaling 12.31 million won.
A and B argued that the Seongdong Tax Office misapplied the Inheritance Tax and Gift Tax Act. They said that under the Enforcement Decree of the act, because there was no transaction within six months before and three months after the gift date in the same apartment complex, the officially assessed price should be the basis for calculating the gift tax.
However, the Seoul Administrative Court found that the Seongdong Tax Office properly calculated the gift tax. Under the Enforcement Decree of the act, even if there was no transaction in the same apartment complex during the six months before the gift date, a sale within two years may be deemed the market value after review by the evaluation committee. The administrative court panel ruled, "The plaintiffs' claims are without merit."