2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition imposing gift tax of KRW 00,000,000, which was imposed on the Plaintiff on September 3, 2014, shall be revoked.

A. ○○ Construction Co., Ltd., an unlisted corporation (hereinafter “○○ Construction”) was established on May 2, 191 for the purpose of carrying out reinforced concrete construction business, and closed on March 31, 2014. The substantial major shareholder of ○○ Construction is BB, and the Plaintiff is an auditor of ○○ Construction as the wife of BB.

B. The change of shareholders in the list of changes in stocks from 2009 to 2011 are as follows (the end of the business year of ○○ Construction shall be March 31 each year).

C. On November 3, 2011, the Defendant determined that the title of 0,000 shares of ○○ Construction (hereinafter “instant shares”) was transferred from the CCC to the Plaintiff on title trust from BB, the actual owner of the instant shares, and determined and notified the Plaintiff of KRW 00,000 (including additional tax) of gift tax on September 1, 2014 (hereinafter “instant disposition”).

D. On November 27, 2014, the Plaintiff appealed to the Tax Tribunal, but was dismissed on May 29, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 3, Eul evidence 1 to 3 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) BB transferred the title of the instant shares by stealing the Plaintiff’s name, and the Plaintiff did not have any consent or consent thereto. Also, the Plaintiff and BB have no purpose of tax avoidance in the title trust of the instant shares. Since the Plaintiff and BB have to add their shares at the time of determining oligopolistic shareholders as the husband and wife, there is no possibility to avoid the secondary tax liability or deemed acquisition tax under the Local Tax Act due to title trust. Accordingly, the instant disposition is unlawful, since the title trust of the instant shares cannot be subject to gift tax under Article 45-2 of the Inheritance Tax and Gift Tax Act

2) Even if the gift tax under Article 45-2 of the Inheritance Tax and Gift Tax Act is imposed on the title trust of the instant shares, when calculating the gift value of the instant shares by using a supplementary evaluation method, the amount of KRW 0 billion outstanding construction accounts calculated by ○○ Construction’s ○○ Construction’s financial statements for the purpose of receiving construction contracts should be excluded from the valuation of net asset value and net profit and loss value, and it should be excluded from the valuation of net asset value inasmuch as 00,000 shares were acquired for the purpose of capital reduction based on the financial statements of ○○ Construction’s financial statements. The instant disposition made with excessive consideration is unlawful.

B. Relevant statutes

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

C. Determination

1) As to the assertion of identity theft

The provisions on deemed donation of title trust under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011; hereinafter “the Inheritance Tax and Gift Tax Act”) shall apply in cases where the actual owner and the nominal owner enter into a registration, etc. in the name of the nominal owner by agreement or communication with respect to the property that requires the transfer or exercise of the right, etc., so the provisions on deemed donation of title trust under Article 45-2(1) shall not apply in cases where the actual owner unilaterally makes a registration, etc. in the name of the nominal owner regardless of the intent of the nominal owner. In such cases, the tax authority must only prove that the actual owner is different from the nominal owner, and shall only prove that the registration, etc. of the nominal owner was made in the unilateral manner regardless of the intent of the nominal owner (see Supreme Court Decision 2007Du

As seen earlier, the Plaintiff is the actual major shareholder of ○○ Construction and the actual owner of the instant shares, and was registered as the auditor of ○○ Construction from March 19, 201, and the Plaintiff continued to hold 26,500 shares of ○○ Construction even before receiving title trust, and was recorded in the statement of changes in stocks, etc., in light of all the circumstances, the evidence submitted by the Plaintiff alone is insufficient to deem that the Plaintiff’s assertion that the name was stolen from BB is insufficient, and there is no other evidence to acknowledge this otherwise. The Plaintiff’s assertion on this part is without merit.

2) As to the assertion that there is no purpose of tax avoidance

A) The legislative intent of Article 45-2(1) of the Inheritance Tax and Gift Tax Act is to effectively prevent the act of tax avoidance using the title trust system and realize the tax justice. Thus, if the title trust was recognized to have been made for any reason other than the purpose of tax avoidance and only a minor reduction of taxes incidental to such title trust takes place, it cannot be readily concluded that there was "the purpose of tax avoidance" in such title trust. However, in light of the legislative intent as above, only if the purpose of the title trust is not included in the purpose of tax avoidance, it cannot be deemed that there was an intention of tax avoidance by applying the proviso of the above provision, and thus, it cannot be deemed that there was no other purpose of tax avoidance. Whether there was an intention of tax avoidance or not should be determined at the time of the title trust. In addition, whether there was a purpose of tax avoidance or not, should be determined at the time of the said title trust, and thereafter, whether there was a tax evasion or not, can be deemed to have been no objective and objective purpose of tax avoidance (see, e.g., Supreme Court Decision 20100Du14).

B) We first examine whether the title trust of the instant shares was due to reasons other than the purpose of tax avoidance. The Plaintiff asserts that the shares of ○○ Construction was initially nominal in order to satisfy the number of promoters under the Commercial Act, and later transferred to the name of another employee or a new representative director due to the employee’s retirement and the change of the representative director, and that the management of ○○ Construction inevitably led to the aggravation of ○○ Construction’s management, and that the Plaintiff made a title trust of the instant shares to the Plaintiff on the ground that there was no other person seeking to be in charge of the office of representative director. However, the mere reason alleged by the Plaintiff is difficult to recognize that there was a clear purpose of having no tax avoidance relation with the instant shares, even after the establishment of the company.

C) Next, there is no possibility of tax avoidance due to the title trust of the instant shares. BB’s global income tax base for the year 201 is KRW 000,000,000, and the sum of interest income and dividend income among them is KRW 00,000,000, and BB was subject to the highest tax rate on the global income tax base for which the interest income and dividend income are added at the time of filing a global income tax return in 2011 (Evidence 1-3). As of the end of the business year 2011, ○ Construction was able to make cash dividends at any time at approximately KRW 2,10,00,00,000, at any time through the acquisition of treasury stocks, capital transfer of surplus funds, etc. (Evidence 5-3). Accordingly, if BB held title trust without acquiring the instant shares under its own name and conducted cash dividends or dividend income in the name of the Plaintiff, it is probable that the dividend income is lower than the global income tax rate (see Article 62-B).

D) Therefore, the evidence submitted by the Plaintiff alone is insufficient to view that the requirement of “not for the purpose of tax evasion” under Article 45-2(1)1 of the Inheritance Tax and Gift Tax Act is proven, and there is no other evidence to acknowledge this otherwise. Therefore, this part of the Plaintiff’s assertion is without

3) As to the assertion that the net asset value assessment containing treasury shares was erroneous

Generally, in the event that the acquisition and disposal of treasury shares are transactions that increase or decrease net assets, such transactions constitute profit and loss transactions that are subject to taxation, but the acquisition and retirement of treasury shares as part of the capital reduction procedure are related to the increase or decrease of capital, and is not considered as capital transactions, but as profit and loss transactions of assets that are subject to taxation (see Supreme Court Decision 91Nu13571, Sept. 22, 1992).

According to the evidence No. 18 and No. 12, BB transferred 00,000 shares of ○○ Construction to 00 million won on December 28, 2009, and reported transfer income tax thereon. ○○ Construction classified the above shares acquired from BB into the account of investment assets, rather than the capital adjustment account, which is an item of capital deduction on the account book. Furthermore, ○○ Construction did not take the capital reduction procedure while holding treasury shares for several years after acquisition. In light of these circumstances, the treasury shares acquired by ○○ Construction should be deemed as acquisition through profit and loss transaction that increases net assets. Thus, it is reasonable to include the Plaintiff’s net asset value as of the base date of appraisal under Article 55(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23591, Feb. 2, 2012; hereinafter “Enforcement Decree”). Accordingly, the Defendant’s assertion that the above shares were calculated based on the net asset value of the relevant corporation as of the date of appraisal.

[As alleged by the Plaintiff, if the above treasury shares are deemed to have been acquired through capital transactions and are not included in the net asset value under Article 55(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act by excluding them from the item of assets, the above treasury shares shall be deducted from the total number of issued and outstanding shares under Article 54(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, since they constitute the item of deduction of capital. In such cases, the reduction of the total number of issued and outstanding shares in proportion to the number of

4) As to the assertion that processed sales and processed assets were included and assessed

A) In submitting evidence Nos. 8 through 20, the Plaintiff asserted that ○○ Construction, upon receipt of a subcontract from a large construction company, issued a tax invoice corresponding to the progress rate recognized by the ordering authority each month, and ○○ Construction, in order to include the sales and sales claims in the account book, and account accounts by deducting the sales claims when collecting the initial payment from the ordering authority at the beginning of the following month. At the end of each business year, the Plaintiff stated that the processed sales and sales claims were appropriated in order to keep the performance in accordance with the financial statements of ○○ Construction (in this case, the net asset value and net profit and loss value of ○○ Construction are excessively assessed and assessed as the assessment per share).

B) According to Gap evidence Nos. 10, 12, 18, and 19, as asserted by the plaintiff during the business year of ○○ Construction, the sales and sales claims amounting to KRW 0,000,000,000, which is the item of "the construction progress rate" during the business year of 2011, and the amount of sales and sales claims amounting to KRW 00,000,000,000, which is the same as at the end of the business year of 2012, and it appears that the financial statements were prepared based on this. However, in light of the revenue statement (Evidence No. 13) submitted by ○○ Construction upon filing a corporate tax report, ○○ Construction is recognized as including the fixed amount of KRW 0,00,00,000 calculated by the following formula in the gross income for the business year of 2011, the amount calculated by the same method as at the end of the business year of 2012.

In determining the business year of accrual of profits and losses, Article 69 (1) of the Enforcement Decree of the Corporate Tax Act provides that "the earnings and losses from the provision of construction, manufacturing, and other services (including contracting construction and reservation sales) shall be included in the calculation of earnings and losses for the relevant business year, respectively, as prescribed by Ordinance of the Ministry of Strategy and Finance, from the business year which includes the date of the commencement of construction of the relevant object to the business year which includes the date of its delivery, in accordance with Ordinance of the Ministry of Strategy and Finance (hereinafter referred to as "rate of work progress")." Article 34 of the Enforcement Rule of the Corporate Tax Act provides that the rate of work progress shall be calculated as the cumulative total amount of total construction expenses incurred by the end of the relevant business year compared to the total construction cost, and the amount included in the calculation of losses for each business year shall be calculated by multiplying the contract amount by the rate of work progress

C) In comparison with the above facts and the provisions of the above corporate tax law, sales and sales claims that ○○ Construction increased at the end of each business year are likely to be reflected in the financial statements of ○○ Construction. The work progress rate calculated by using the accumulated total construction cost amount generated by the end of the pertinent business year compared with the total construction cost scheduled, does not necessarily coincide with the studio recognized by the ordering authority. There is no evidence suggesting that ○○ Construction arbitrarily reduced the total construction cost scheduled as the basis for calculating the work progress rate, or arbitrarily increased the cumulative total construction cost amount at the end of the pertinent business year. Article 56(4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the net profit and loss amount for assessing the net profit and loss value shall be calculated based on the income of each business year under the provisions of the Corporate Tax Act. Therefore, it is difficult to recognize the fact that ○○ Construction has excessively appropriated the net asset value and net profit and loss value through the window dressing accounting, and thus, the Plaintiff’s assertion is without merit.

5) Sub-decisions

As seen earlier, the Plaintiff’s assertion is without merit. The instant disposition is justifiable.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit, and the costs of lawsuit shall be borne by the plaintiff who has lost. It is so decided as per Disposition.