(1) Necessary expenses that may be deducted from the transfer value when calculating capital gains of a resident shall be as follows: <Amended by Act No. 14389, Dec. 20, 2016; Act No. 15225, Dec. 19, 2017; Act No. 16104, Dec. 31, 2018; Dec. 31, 2019; Jun. 9, 2020>
1. Acquisition value (excluding the liquidation money collected pursuant to Article 20 of the Special Act on Cadastral Resurvey as a result of the increase of an area on official cadastral records as a result of the determination of a boundary under Article 18 of that Act): Provided, That the amount under item (b) shall apply only if it is impracticable to ascertain the actual trading price under item (a):(a) The actual trading price for acquiring assets specified under Article 94 (1);(b) The amount determined through the sequential application of the sales case value, appraised value, or converted acquisition value prescribed by Presidential Decree;
2. Capital expenditure, etc. prescribed by Presidential Decree;
3. Transfer expenses, etc. prescribed by Presidential Decree.
(2) Necessary expenses for capital gains under paragraphs (1) shall be calculated as follows: <Amended by Act No. 10408, Dec. 27, 2010; Act No. 15225, Dec. 19, 2017; Dec. 31, 2019>
1. Where the acquisition value is based on the actual transaction value, necessary expenses shall be the following amount plus the amount under paragraph (1) 2 and 3:(a) Where it is based on paragraph (1) 1 (a), the relevant actual transaction value;(b) Where the actual transaction value as at the time of acquisition is calculated based on the converted acquisition value pursuant to paragraph (1) 1 (b) and Article 114 (7), and the acquisition value of assets (including assets inherited or donated) acquired before the date (hereafter referred to as "deemed acquisition date" in this item) on which assets are deemed acquired under Article 8 of the Addenda to the Income Tax Act (Act No. 4803), is based on the total of the actual trading price as at the time of acquisition and the amount calculated by multiplying such value by the producer price increase rate during the period of possession from the acquisition date until the day before the deemed acquisition date, such total amount;(c) Where it is based on the main sentence of paragraph (7), the relevant actual trading price;
2. Necessary expenses in other cases shall be calculated by adding the amount of each asset prescribed by Presidential Decree to the amount under paragraph (1) 1 (b) (excluding where subparagraph 1 (b) applies), paragraph (7) (excluding where subparagraph 1 (c) applies), or Article 114 (7) (excluding where subparagraph 1 (b) applies): Provided, That, if the acquisition value becomes the converted acquisition value in accordance with paragraph (1) 1 (b), and the amount under item (a) is smaller than that of item (b), the amount specified in item (b) may be treated as necessary expenses:(a) The aggregate of the converted acquisition value under paragraph (1) 1 (b) and the amount prescribed by Presidential Decree in the main sentence;(b) The aggregate of the amounts under paragraph (1) 2 and 3.
(3) In calculating necessary expenses pursuant to paragraph (2), if any depreciation cost for assets during the holding period of any transferred assets are included or to be included in necessary expenses, in calculating the amount of business income for each taxable period, the amount calculated by deducting such cost from the amount under paragraph (1) shall be the acquisition value thereof. <Amended by Act No. 10408, Dec. 27, 2010>
(4) Deleted. <by Act No. 12169, Jan. 1, 2014>
(5) Matters necessary for calculating necessary expenses, such as the scope of the actual trading price paid for acquisition, shall be prescribed by Presidential Decree. <Amended by Act No. 12169, Jan. 1, 2014>
(6) Deleted. <by Act No. 12169, Jan. 1, 2014>
(7) In applying paragraph (1) 1 (a), where a resident who has transferred assets pursuant to Article 94 (1) 1 and 2 has confirmed the actual trading price according to the method prescribed by Presidential Decree as at the time of acquisition of such assets, it shall be deemed the actual trading price as at the time of acquisition by such resident: Provided, That this shall not apply to any of the following cases: <Amended by Act No. 15225, Dec. 19, 2017>
1. Where the transfer value of the preceding owner on the relevant assets is corrected pursuant to Article 114;
2. Where capital gains tax on the relevant assets of the preceding owner is not imposed, and where such assets have been confirmed transferred at a price higher than the actual trading price.[This Article Wholly Amended by Act No. 9897, Dec. 31, 2009]