[2] In a case where an inheritee A, a surety A, created a collateral on his own land and a building to secure a debtor’s obligation to pay a loan to Byung Bank Co., Ltd., and thereafter took over the above obligation with exemption from liability, and the tax authority deemed this as a prior donation and imposed an inheritance tax on the inheritor by adding the above obligation amount, etc. to the taxable amount of inheritance tax, the case holding that it cannot be deemed that the amount of the loan he acquired was donated to Eul, or the above assumption of obligation

[2] In a case where: (a) an inheritee A, a surety, created a collateral on his own land and a building to secure a debtor’s obligation for loans to Byung Bank Co., Ltd.; (b) thereafter, Company B exempted the obligor from liability; (c) the tax authority imposed an inheritance tax on the inheritor by adding the amount of debt, etc. to the taxable amount of inheritance tax, considering that the assumption of obligation constitutes a prior donation; and (d) the tax authority deemed that the aforementioned assumption of obligation constitutes a prior donation and imposed an inheritance tax on the inheritor by adding the amount of debt, etc. to the taxable amount of inheritance tax, the case holding that: (a) on the ground that there is no possibility for repayment even if the obligor A exercised the right to demand reimbursement in consideration of the economic condition of the company Eul; and (b) as long as it is deemed that there is no possibility for

2. The part that exceeds KRW 1,237,297 among the disposition imposing inheritance tax of KRW 147,159,127 against the plaintiffs on September 9, 2009 shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

A. On December 8, 2007, when the father, Nonparty 1 (hereinafter “the decedent”) died, the Plaintiffs reported inheritance tax to the Defendant on June 8, 2008 with the mother, Nonparty 2 (the death of July 10, 2008), together with the inheritance tax amount of KRW 1,913,302,658.

B. On July 2009, the Defendant established a right to collateral security on July 19, 2002, in order for the decedent to secure his/her obligation for loans to the Korea Exchange Bank (hereinafter “Korea Exchange Bank”) Korea (hereinafter “Korea Exchange Bank”) which is a stock company (hereinafter “Korea Exchange Bank”) (hereinafter “Korea Exchange Bank”), and confirmed on October 25, 2006 that the decedent took over the above obligation of 61,180,000 won of the debt amount from the discharge of liability (hereinafter “instant obligation”).

C. Accordingly, on September 9, 2009, the Defendant: (a) deemed that the assumption of an obligation by the decedent in this case constitutes a prior donation; and (b) imposed inheritance tax on KRW 147,159,127, which was calculated by adding the amount of the obligation of the loan acquired to the taxable amount of inheritance tax of KRW 611,180,00, to the taxable amount of inheritance tax; (c) the Plaintiffs and Nonparty 2 (hereinafter “Plaintiff, etc.”) jointly and severally paid KRW 87,630,247; (d) Nonparty 1:22,53,077; (e) Plaintiff 20,587,561; and (e) Plaintiff 3:16,408,242 won; and (e) the instant disposition”).

D. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on November 17, 2009, but was dismissed on March 23, 2010.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1 and 2, Eul evidence Nos. 1, 2, 4, 5, and 7 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiffs' assertion

In a situation where it is entirely impossible for the decedent, who is a surety, to exercise the right to indemnity against the insolvent Cheongdo at the time, to accept the obligation of this case, the obligation of this case was only an inevitable measure to prevent a voluntary auction, and it does not additionally bear the obligation of the decedent. Rather, if the decedent did not take over the obligation of the loan, it is naturally deducted from the value of the inherited property, so the amount of the obligation of the loan taken over cannot be deemed as a prior donation property. Therefore, the part that is deemed as a prior donation property, including the amount of the obligation of the loan taken over by the decedent in the disposition of this case, is unlawful.

(2) The defendant's assertion

At the time of undertaking the obligation of this case, the inheritee did not agree on any consideration, condition, etc. for the assumption of the obligation of this case at the time of undertaking the obligation of this case, and the obligor did not exercise the right to demand reimbursement against the Cheong-do, which constitutes a prior donation to the Cheong-do, and even if not, Nonparty 3 and 4, who is the inheritee of the inheritee, are the Cheong-do's shareholder, and in particular, Nonparty 3 was working as the Cheong-do's representative director, and thus, Nonparty 3 was a donation to Nonparty 3 and Nonparty 4, the inheritor, through the assumption of the obligation of this case. Therefore, the disposition of this case, which included the above loan amount in the value of inherited property

B. Relevant statutes

[Attachment Form 1] The same shall apply to the entry.

C. Facts of recognition

(1) On July 19, 2002, the decedent created a Japanese maximum debt amount of 91 million U.N. to secure a loan obligation against the Cheongdon Foreign Exchange Bank.

(2) After that, on September 12, 2006, the Cheongdo Solo had assumed the obligation of loans of KRW 611,180,000 to the non-permanent bank of Soloon on October 25, 2006 by the decedent, and the third person, who was the debtor of the right to collateral security, and changed the maximum debt amount to KRW 910,000,000, respectively.

(3) The decedent did not agree on any consideration or condition in return for the assumption of the obligation of the instant case.

(4) A company established on November 1, 1995 for the purpose of the construction waste disposal business, which was established as of September 12, 2006, as of September 12, 2006, Cheongdo-do was responsible for the debt amounting to KRW 245,108,350 due to the bill of exchange, including the debt amounting to KRW 61,180,000 against the foreign bank, and the debt amounting to KRW 95,583,230 due to the bill of exchange, and the debt amounting to KRW 77,00,000,000, which is difficult to recover with the active property, was closed on December 20 of the same year.

(5) Of the total 100,000 shares of Cheongdol in the business year 2005, Nonparty 3, an infant of the inheritee, owned 50,00 shares and 16,660 shares, respectively, and Nonparty 4 owned 66.6% shares. Nonparty 3 was registered as the representative director of Cheongdol, together with Nonparty 5.

(6) When the decedent died on December 8, 2007, Nonparty 3 and 4, including the plaintiff et al., succeeded to his rights and duties as co-inheritors. After consultation and division of inherited property with the following contents, the non-party 2 reported inheritance tax to the defendant on June 8, 2008, as stated in the "Tax Calculation Table" in the second list.

< The Consultation Division>

Nonparty 21.5/6.502 Nonparty 1/6.508 Nonparty 1/6.508 Nonparty 31/6.502 Plaintiff 21/6.502 Nonparty 31/6.502 Nonparty 31/6.115 Nonparty 41/6.50

(7) After conducting an inheritance tax investigation on the decedent on September 9, 2009, the Defendant: (a) deemed on September 9, 2009, that the decedent was exempted from the obligation to repay the obligation to pay the Cheongdol’s loan through the assumption of the obligation of this case; (b) deemed that the amount of the obligation to pay the loan acquired by the decedent was included in KRW 61,180,000, and KRW 13,675,800,000, and KRW 8,010,946, which is the deposit and contribution of the financial institution omitted in reporting, shall be included in each taxable value; and (c) as public charges, the amount calculated by deducting the amount of value-added tax and the amount of additional collection under the return of the global income tax from the taxable value, 2,528,116,424, which is the amount calculated by deducting the amount of KRW 18,00,00,00,000.

[Reasons for Recognition] Facts without dispute, each of the above evidences, Gap's 3, 6 evidence, Eul's 3, the purport of the whole pleadings

D. Determination

(1) Legislative intent that provides for liability to prove the value of inherited property and addition of the value of donated property in advance

(A) As a matter of principle, the tax authority is responsible for proving the value of inherited property (see Supreme Court Decision 85Nu501, Jul. 22, 1986). However, Article 14 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Inheritance Tax Act”) provides that the amount of debts related to the ancestor or inherited property as of the commencement date of inheritance shall be deducted from the value of inherited property. Here, “an ancestor’s debts to be deducted from the value of inherited property” refers to the amount of debts that the ancestor would have to pay with the nationality of the deceased at the time of commencement of inheritance. In cases where the principal obligor bears joint and several liability for a third party or is liable as a surety at the time of commencement of inheritance, and where it is deemed impossible for the principal obligor to obtain reimbursement from the value of inherited property, the amount of debts can be deducted from the value of inherited property if it is deemed that there is no possibility for the obligor to receive reimbursement from the value of inheritance property under the same circumstance as 20.

(B) Furthermore, Article 13(1)1 and 2 of the Inheritance Tax Act provides that the value of an inherited property which an ancestor donated to his heir within a certain period prior to the commencement of inheritance and the value of an inherited property that an ancestor donated to a person other than his heir shall be added to the value of an inherited property subject to inheritance tax under Article 13(1)1 and 2 of the Inheritance Tax Act is aimed at maintaining the equity of inheritance tax and gift tax in tax burden by including the value of an inherited property that an ancestor donated to his heir within the taxable amount of inheritance tax as much as possible, and at the same time preventing an act of unreasonably reducing inheritance burden by transferring the property subject to imposition of inheritance tax in advance into the form of donation and distributing and concealing inherited property (see Supreme Court Decisions 93Nu8092, Sept. 28, 1993; 94Nu2480, Aug.

Therefore, in determining whether a “donation property” is subject to addition to the taxable amount of inheritance taxes, the reason why the property was donated does not simply mean that the property is included in the value of inherited property as a matter of course in the gift tax, but rather, it is reasonable to interpret the above legislative purpose and determine the substance according to the substance regardless of the name or form of the income, profit, property, act or transaction.

(2) The issues of the instant case

(A) In the instant case, the principal grounds for the Defendant’s disposal of the instant disposition by deeming the decedent’s exemption from the obligation of the Cheongdol’s loans through the assumption of the obligation in this case as donated property included in the taxable amount of inheritance taxes are that: (a) the decedent did not agree on any consideration or condition in return for the assumption of the obligation; and (b) Nonparty 3 and 4, who are the children of the decedent, were the shareholders of the Cheongdol’s.

(B) Therefore, the key issue of the instant case is whether the inheritee’s acceptance of the obligation of the Cheongdol’s loan through the assumption of the obligation in this case is ① whether it can be interpreted as “a donation of an amount equivalent to the benefit arising from the acceptance or repayment of an obligation by a third party upon acceptance of an obligation from a third party” as stipulated in Article 36 of the Inheritance Tax Act, and ② even if it is possible to impose gift tax on Cheongdol, which is an obligor (contributary donee) who has obtained such benefit as it constitutes a donation, the addition of the value of the inherited property to the value of the property donated

(3) Whether the instant assumption of debt constitutes “donation” or not

(A) Whether the donation constitutes “domination to an obligor’s initiative”

1) In principle, there is a legitimate interest in repaying the obligor’s obligation, and inasmuch as a surety (see Supreme Court Decision 2009Da19802, 19819, Jul. 23, 2009) who has pledged another’s property to secure another’s property (see Supreme Court Decision 2009Da19802, 19819, Jul. 23, 2009) has acquired or repaid the obligor’s obligation with discharge, or has donated the obligor’s interest by accepting or repaying the obligor’s obligation beyond the maximum debt amount, or by not exercising the obligor’s right of reimbursement, even if the obligor is de facto able to recover the obligation as the right of reimbursement, even if the donee performs the secured obligation on behalf of the obligor and exercises the obligor’s right of reimbursement on behalf of the obligor, it cannot be deemed that the secured obligation is not deemed a donation.

2) In the instant case, after accepting the obligation of this case on October 25, 2006, in light of the fact that the debt amount of the right to collateral security has been changed from "Nlified 91,00,000 won" to "the maximum debt amount of the right to collateral security before and after the change, it seems that there is no difference between the maximum debt amount of the right to collateral security before and after the change. However, even if the decedent who has pledged his property to secure his property exercises the right to collateral, taking into account the economic situation of solo, the decedent cannot be reimbursed even if exercising the right to collateral, and the decedent, who is the debtor within the scope of the maximum debt amount, took over the debt amount of 611,180,000 won as the debtor, within the scope of the maximum debt amount in order to avoid a voluntary auction on his own real property in the future. Furthermore, insofar as it is deemed that the decedent could actually exercise the right to demand reimbursement as described in paragraph (4) below, it cannot be deemed that he donated the amount of loan to the debtor.

(B) Whether the donation constitutes “a donation to Nonparty 3 and 4”

1) The shareholders of a stock company are liable only for the company to the extent of the subscription price of their shares (Article 331 of the Commercial Act) and any other third parties, such as creditors, etc., are not liable as a matter of course for the company’s transaction obligations, etc. on the ground that they are shareholders. Furthermore, the representative director merely is an institution of a stock company, and even if the total amount of the company’s obligations to a third party has been repaid, it cannot be said that the shareholders or representative director

2) However, in a case where a shareholder or representative director in such position has jointly and severally guaranteed the company's obligation to a third party, if one of such joint and several sureties has repaid the company's obligation on behalf of the principal debtor who has no ability to repay, and the other joint and several sureties has not exercised the right to indemnity against the amount of obligation, gift tax shall be imposed on the profits earned by the joint and several sureties who has not performed the guaranteed obligation in accordance with Article 36 of the Inheritance Tax Act. Furthermore, in the case of a surety's property to secure another's obligation, there is a benefit to subrogate the creditor in proportion to the number of persons of the surety's obligation (Article 482 (2) 5 of the Civil Act). In the event that

3) In the instant case, as seen earlier, the decedent, who has pledged his property to secure another’s obligation, has discharged the obligor from the obligation to the outside bank of Solo, through the assumption of the obligation in this case. However, even after examining the record, there is no special evidence, such as that Nonparty 3 and Nonparty 4 concluded a joint and several surety contract on the obligation to lend to Solo, a stock company, to the outside bank. Thus, the circumstance asserted by the Defendant alone cannot be deemed to have donated the amount of the obligation to the outside party 3 and 4.

(4) Whether it conforms to the legislative purpose and substance over form principle to include the amount of the loan acquired in the value of inherited property

(A) As seen earlier, the legislative purport of stipulating the addition of the value of inherited property to the value of donated property within a certain period prior to the commencement of inheritance is to prevent an act of unreasonably reducing the burden of inheritance tax by relocating property to the form of donation in advance that is subject to the imposition of inheritance tax, and thus, if it is not a property subject to inheritance tax or an act of unreasonably reducing inheritance tax, such provision may not be applied.

(B) In the case of this case, the following facts revealed by the facts as seen earlier, namely, (i) Cheong-do, an obligor at the time of undertaking the obligation of this case, was in insolvent due to default on September 12, 2006, etc., and thus, the inheritee, as a surety, should not perform its loan obligations to avoid any voluntary auction on the real estate of this case; (ii) there is no possibility of being repaid even if Cheong-do, an obligor, exercised his right to reimbursement on December 20, 2006, and (iii) it is objectively acknowledged that even if the obligor exercised his right to reimbursement at the time of undertaking the obligation of this case, there is no possibility of being reimbursed, and that the obligor’s right to reimbursement cannot be recovered even if it was exercised at the time of undertaking the obligation of this case, if the decedent did not accept the obligation of this case, the amount of the above loan obligation within the scope of the maximum debt amount of the right to collateral security should be deducted from the inherited property amount, and thus, it cannot be interpreted unfairly as an obligation of this case.

(5) Sub-committee

Therefore, the Defendant’s disposition of this case, inasmuch as the amount of 611,180,000 won, which the Defendant acquired by the Defendant’s exemption from liability through the assumption of the obligation of this case, cannot be deemed to constitute “ donated property value” added to the value of inherited property, should be revoked as it is unlawful regarding the above part.

(6) Justifiable tax amount

If the amount of debts 611,180,000 won from the taxable amount of inheritance taxes of this case is deducted from the taxable amount of inheritance taxes of this case, the taxable amount of inheritance taxes of 1,916,936,424 won shall be the taxable amount of inheritance taxes of this case, and based on this, if the inheritance tax is calculated, the amount of inheritance tax shall be KRW 1,237,297, as stated in the “justifiable Tax Amount Calculation Table” in the “Tax Amount Calculation Table” in the

3. Conclusion

Of the instant disposition, the Plaintiff’s claim seeking the revocation of the part exceeding the above KRW 1,237,297 among the disposition of this case can be accepted with merit. Since the judgment of the first instance is unfair with different conclusions, the judgment of the first instance is revoked and the Plaintiff’s claim is accepted

[Attachment 1] Related Acts and subordinate statutes: omitted

[Attachment 2] Tax Calculation Table: omitted

Judges Kim Chang-sung (Presiding Judge) Kim Jong-sung free of charge