Article 1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act; and

2. The plaintiff's remaining claims are dismissed.

3. Of the costs of lawsuit, 2/3 shall be borne by the Plaintiff, and the remainder by the Defendant.

Cheong-gu Office

Disposition No. 1 and the Defendant’s disposition of gift tax on March 2, 2017, which the Plaintiff rendered, shall be revoked.

A. On April 28, 1979, the Plaintiff resided in the Republic of Korea and moved the United States of America (hereinafter referred to as the “U.S.”) to Luxembourg AB and ACC (hereinafter referred to as only in Korean name) to his child.

B. On September 25, 1990, the Plaintiff and AAA acquired 1/2 equity shares in USD 1,750,017, respectively, among California ○○○○○○○○○○○○○ 2302 (hereinafter “instant real property”).

C. On October 10, 2012, AA transferred its shares among the instant real estate to the Plaintiff (hereinafter “instant gift”). On the same day, the Plaintiff transferred the instant real estate to Gloria Gtilt Telecommunications (hereinafter “instant transfer”). On April 15, 2013, the Plaintiff reported and paid USD 409,860 upon the transfer of the said real estate at the U.S. International RS Califia tax office.

(d) The defendant determined KRW 2,101,20,00 and KRW 1,593,681,786 of the gift tax base on March 2, 2017 on the ground that the plaintiff did not report the gift tax and transfer income tax of this case to the tax authority of the Republic of Korea, and on March 2, 2017, the defendant imposed on the plaintiff the gift tax base of the gift tax of this case 】 (the tax base of the transfer income tax 】 】 ¡¿ (the additional tax 】 】 】 】 】 】 】 】 】 】 】 】 (the amount of the additional tax 】 】 】 】 】 】 】 】 the amount of the transfer income tax of this case 】 】 】 】 】 (the amount of the additional tax 】 】 】 the amount of the local income tax 】 (including the amount of the additional tax 】 the source 】 】 the amount of the local income

E. In imposing the transfer income tax of this case, the Defendant deducted total amount of KRW 399,046,257 according to the foreign tax credit provision under Article 118-6 (1) 1 of the Income Tax Act with respect to USD 196,618 of the federal tax and USD 159,680 which is confirmed to have been paid by the Plaintiff to the Government of the United States of America.

F. On November 16, 2017, the Plaintiff acquired U.S. citizenship, and is currently residing in California Luxembourg.

[Ground of recognition] Facts without dispute, Gap 1, 9 through 11, Eul 1, 4 through 7, the purport of the whole pleadings

2. The plaintiff's assertion

A. At the time of the donation and transfer of this case, the Plaintiff was living together with AB, ACC and the United States, and even considering the objective facts of living relationship, etc., the Plaintiff does not constitute a domestic resident subject to the Income Tax Act and the Inheritance Tax and Gift Tax Act. Therefore, each disposition of this case rendered on the premise that the Plaintiff is a domestic resident

B. Even if the Plaintiff is a domestic resident, the Plaintiff constitutes a dual resident because the Plaintiff is also a U.S. resident. According to Article 3(2) of the Convention between the Republic of Korea and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment (hereinafter “Korea-U.S. Tax Treaty”), the Plaintiff’s permanent residence where the Plaintiff resides with his family is a U.S. resident. Therefore, the imposition of capital gains tax on the premise that the Plaintiff is determined as a domestic resident is unlawful.

C. Even if the Plaintiff is liable to pay capital gains tax, the Plaintiff paid USD 227,935 to the federal government of the United States of America after the transfer of the instant real property, and USD 181,925 to California, and thus, the Plaintiff is obliged to calculate the non-reported penalty tax by applying the tax rate for non-reported penalty after deducting the amount paid to the United States as the already paid tax amount. Nevertheless, the Defendant calculated the non-reported penalty tax by multiplying the amount of tax calculated without the deduction of the already paid tax amount by the rate of non-reported penalty tax. Thus, the imposition of non

D. The Plaintiff had lived in the U.S. for a long time, and the donor was entitled to be exempted from gift tax through annual gift tax exemption and integrated tax credit, and thus, even though it was not entirely anticipated to pay the tax on the instant gift, the Plaintiff was subject to additional tax of KRW 400 million, which is almost identical to the principal tax, and thus, the instant disposition imposing the gift tax is unlawful as it constitutes an abuse of the imposition right.

3. Relevant statutes;

Attached Form 2 shall be as listed in attached Table 2.

4. Determination

A. Whether the Plaintiff constitutes a domestic resident

1) Relevant regulations and legal principles

A) According to Article 1-2(1)1 of the former Income Tax Act (amended by Act No. 12852, Dec. 23, 2014; hereinafter the same), “resident” means an individual who has either a domestic address or a temporary domicile of at least one year (Article 1-2(1)1), and under Article 2(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26067, Feb. 3, 2015; hereinafter the same), “resident” means a place where a person resides for a long time outside his/her domicile and where a general living relationship is not formed as the address (Article 2(2) of the Enforcement Decree).

On the other hand, when an individual residing in Korea has a family living together in Korea and is deemed to reside in Korea for not less than one year in view of his occupation and property status, he shall be deemed to have a domicile in Korea (Article 2(3)2 of the Enforcement Decree), and when a person living or working in a foreign country has an occupation that requires him to dwell in a foreign country for not less than one year, or has a foreign nationality (Article 2(4)1 of the Enforcement Decree) or a person who has obtained a permanent residence in a foreign country, and it is not deemed that he has no family living together in Korea and mainly intends to reside in Korea in view of his occupation and property status, he shall be deemed to have no domicile in Korea (Article 2(

Article 2(1)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter the same) provides that the gift tax shall be imposed on all property donated to a resident if the person who donated the property is a resident (Article 2(1)1). According to the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter the same shall apply), the relevant provisions of the Enforcement Decree of the Income Tax Act shall apply to the determination of residence and residence, and the determination of a resident and non-resident

B) In light of the contents and purport of the aforementioned relevant provisions, the distinction between a resident and a nonresident shall be determined by comprehensively taking into account the existence of a family member living together in the Republic of Korea, domestic occupation and income status, assets located in the Republic of Korea, domestic economy and legal relations, etc. Furthermore, the Income Tax Act only stipulates that the objective living relationship in the Republic of Korea should be comprehensively considered when determining an individual’s identity is determined, and the living relationship in the other country is not cited as a comparative determination factor, and it is seeking resolution among the countries in preparation for cases where the resident status of both countries is recognized, it shall be determined as a domestic resident on the basis of a domestic living relationship (see Supreme Court Decision 92Nu1695, May 27, 1993).

In particular, Article 2(1) of the former Enforcement Decree of the Income Tax Act provides that the term "family living together with a domestic address" means a relative who lives together with a living fund and a place of residence in the Republic of Korea, and "when it is deemed that a resident is residing in the Republic of Korea for at least one year in view of his/her occupation and property status" means cases closely related to a domestic place of business, such as cases where the resident is deemed to have a work relationship or a work relationship to the extent that he/she needs to reside in the Republic of Korea for at least one year, or where he/she appears to have a need to manage and dispose of assets for at least one year (see, e.g., Supreme Court Decision 2018Du60847, Mar. 14, 2019).

2) In the case of this case, the fact that the Plaintiff acquired permanent residence with the United States along with the AA after married with the AA, and resided in the California, California, located in the territory of the United States at the time of donation and transfer of this case is recognized as above.

However, in full view of the following circumstances, it is reasonable to see that the Plaintiff is a domestic resident, taking into account the above facts acknowledged as above, Gap evidence Nos. 4, 5, 35, 41, 42, Eul evidence Nos. 1 through 13, 17, 19, and 22, and the overall purport of the pleadings.

A) The plaintiff's domicile under the Resident Registration Act

From February 27, 1987, the Plaintiff maintained his domicile under the Resident Registration Act in 00, 203, ○○○○○○○-ro, ○○○○-ro, and 203, and acquired the ownership of the said residence on June 19, 2005. AA mainly remains in Korea and continues to reside until now in the said domicile.

B) Whether a family member living together with the plaintiff is residing in Korea

① On May 198, 1998, the Plaintiff’s AB admitted to the Dong branch of the United States, and had been working as Drrrrrrrrrr in the New York branch located in the Dong branch of the United States, ○○○○, New York branch, located in the Dong branch of the United States, until the time of the instant donation and transfer after the university graduation. In addition, from around 2000, the Plaintiff’s ArrrvCC had completed studies in Bbbb Univs located in the Dong branch of the United States, and in the U.S., Bccc Univs Law School located in the North Korean branch of the United States, and resided in the Dong branch of the United States, around July 2008 after obtaining the qualification as the U.S. California attorney at around October 201.

Although they were the Plaintiff’s children and were residing in the United States at the time of the donation and transfer of this case, they resided in the Dong division located far away from the California of California of the U.S., which the Plaintiff resided as an adult after the university graduation, and did not engage in a community life as a family member living together with the Plaintiff and having a job in the United States. In addition, there is no evidence regarding the Plaintiff’s children as an adult, and there is no relation to the Plaintiff’s payment of money, such as living capital, even if they provided a part of the living capital, it does not appear that they were using the same living capital in their daily lives.

② Since the Plaintiff’s husband assumed office as the president of ○○○○○○○○○○○○, the president of ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ in 2002, the principal director of ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○, etc., both of which reside in Korea and were employed as the representative director of a local media organization. From 2007 to 2012, AA paid a total of KRW 3 billion from a number of companies, including ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○

③ The Plaintiff appears to have been living in the Republic of Korea from AA, a husband, without any particular source of income, as a business principal agent after the marriage with AA to the time of donation and transfer of the instant case. There is no evidence that the Plaintiff had been working in the United States or engaged in other particular income activities. Meanwhile, as long as the Plaintiff has been married with AA on April 28, 1979, and there is no specific material, such as that the marriage has been actually broken down, it is determined that AA is a family member living in the Republic of Korea and living together with the Plaintiff.

C) The Plaintiff’s domestic asset status, property activities, etc.

① As of the year 2012, the Plaintiff owned the following domestic real estate.

Types

Details

Date of acquisition

acquisition

Grounds

Value (won)1

1

Apartment house

○○○-si ○○○-dong ○○

○○○ 606 (73 square)

6 May 2005

AA Donations

580,000,000

2

Apartment house

○○-si ○○○○ Dong

○○○ 203 (48 square)

7.19

Sales

422,000,000

3

Apartment house

○○-si ○○○○ Dong

○○○ 304 (48 square)

May 9, 2006

Sales

403,000,000

4

Land:

○○○ also ○○○○○-gun ○○○○○ 557 square meters 3,008 square meters

april 2, 1996

Termination of Title Trust

25,000,000

5

Land:

○○ ○ ○○ ○○ ○○ ○○

46,909 square meters for forests

april 2, 1996

Termination of Title Trust

40,000,000

1) Based on the standard market price at the time of the instant donation.

② In addition, as of the end of 2012, the Plaintiff owned the right to lifelong membership of ○○ Hotel Peaco clubs amounting to KRW 710,990,00 in total and KRW 20,840,00.

③ On April 7, 2012, the Plaintiff opened an account with the Plaintiff’s name on April 7, 2012, which is close to the donation and transfer date of the instant case. On July 19, 2005, the Plaintiff acquired the ownership of an apartment building ○○○○○○○○○○○○○○○○, a resident registration domicile on July 19, 2005, and subsequently established a collective security with the maximum debt amount of KRW 260,00,000 on September 23, 2016 with the ○○○○ Savings Bank, Inc., Ltd., which is located within the Republic of Korea.

④ On May 6, 2005, the Plaintiff donated ○○○○○○-dong ○○○○○○○ 606, ○○○○○○○○○, and paid gift tax to the tax authority. From 2006 to 2016, the Plaintiff paid property tax and comprehensive real estate holding tax on domestic assets, and paid interest income tax on domestic financial income from 2007 to 2011.

3) Sub-determination

Therefore, in light of the property status and property management activities at the time of the donation and transfer of this case, the Plaintiff was residing in AA, a spouse living in the Republic of Korea at the time of the donation and transfer of this case, and the Plaintiff appears to have to have to enter the Republic of Korea to manage and dispose of its owned assets for at least one year, and thus, it constitutes a domestic resident as prescribed by the former Income Tax Act and the former Inheritance Tax and Gift Tax Act.

B. Whether the disposition of transfer income tax of this case is legitimate

1) Whether the Plaintiff constitutes a U.S. resident

The U.S. tax law provides that a foreigner residing in the U.S. shall be deemed a resident of the U.S. if the foreigner is a permanent resident. The Plaintiff constitutes a resident of the U.S. at the time of transfer

(ii)the determination of the status of a dual resident;

A) If a certain individual is both a domestic resident and a foreign resident under the Income Tax Act and thus constitutes a person liable to pay income tax, etc. under the relevant foreign law, one income may be imposed doublely. Therefore, in order to prevent such double resident, a tax treaty between countries is concluded and a separate provision is established. If a person liable to pay taxes is recognized as a dual resident, the determination of whether the person is deemed a national of any country in which the overlapping tax treaty was concluded with the country (see, e.g., Supreme Court Decision 2014Du13959, Feb. 26,

B) Accordingly, Article 3(2) of the Korea-U.S. Tax Treaty provides that where a person becomes a resident of both Contracting States, his status shall be determined as follows: (a) the permanent residence, (b) the center of important interests, (c) the ordinary residence, (d) the nationality, (e) the mutual agreement is decided in sequence.

C) Here, “permanent residence” refers to all types of residence where an individual can continue to stay for any purpose other than short-term stay, such as travel or business trip, and where such individual owns or rents his/her residence, etc., the circumstance that such individual owns or rents his/her residence does not need to be considered in determining the permanent residence. In cases where such permanent residence exists in both Contracting States, whether the following criteria for determining the resident state of the dual resident under the Korea-U.S. Tax Treaty are the center of significant interests, namely, where the Contracting States are more closely related to the individual’s personal and economic status, and the degree of relevance between the two Contracting States is more deep, considering the family relationship, social relationship, occupation, political and cultural activities, place of business, place of business, etc. (see, e.g., Supreme Court Decision 2018Du60847, Mar. 14, 2019).

2) The above Supreme Court precedents have applied the Korea-Japan Tax Treaty, but both the Korea-U.S. Tax Treaty and the Korea-Japan Tax Treaty use the concept of permanent residence and significant interest as a basis for determining the status of a resident of a Contracting State, and are the same as the purpose of the Treaty is to prevent double taxation. Thus, this case may also be invoked.

D) In light of the aforementioned legal principles, in light of the following circumstances acknowledged by the purport of Gap evidence Nos. 2 through 8, 15 through 24, 26 through 33, and 40 as a whole, the plaintiff has a permanent residence in both Korea and the United States, but it is reasonable to regard the plaintiff as a resident in the United States of America under the Korea-U.S. Tax Treaty, since both the plaintiff and the United States have a permanent domicile in Korea and the Contracting States closely related

① Since the marriage with AA in 1979, most of the Plaintiff had been staying in the United States, and in particular, from 2007 to 2012, the Plaintiff was staying in the Republic of Korea for 112 days in total. Compared with the date of the Plaintiff’s stay in the Republic of Korea and the date of his stay in the United States, the possibility of the Plaintiff’s continuous residence in the United States is higher than the possibility of the Plaintiff’s entry into the Republic of Korea and permanently residing in the Republic of Korea. There is no evidence to deem

② 원고는 미국에 체류하는 동안 미국 캘리포니아주에 거주하면서 고정적인 생활관계를 형성하였다. 원고는 2003. 2. 1. 미국 의료보험에 가입하여 현재까지도 의료보험을 유지하면서 미국에서 수차례 치료를 받았고, LA에 소재한 교회에 매주 출석하여 예배에 참석하였다. 또한 원고는 2004. 3. 29. 미국에서 휴대폰을 개통하여 아직도 사용하고 있고, 1990년부터 2016년 7월경까지 미국 회사와 자동차 보험계약을 체결하기도 하였다. 나아가 원고는 미국 ○○○○ Public Library 및 ◎◎◎◎ Public Library의 회원으로 가입하여 현재까지도 회원자격을 유지하고 있고, 1996년부터 2011년까지 미국 소재 College나 Art Center 등에서 회화 수업을 수강하는 등 문화 활동을 영위하기도 하였다.

③ The Plaintiff acquired permanent residency in the United States, and the Plaintiff’s children, as those with American citizenships born in the United States, have a stable occupation after undergoing education in the United States, and thus, seems to be clear that they will live in the United States at the time of 2012 and thereafter up to the present time. At the time of donation of this case, the Plaintiff’s children, who had completed education in the United States, were to become adults and live independently, but they were unable to return to Korea and live together with AA. This seems to be because the Plaintiff’s children were living as citizens of the United States and all social relations and cultural activities surrounding the Plaintiff were mainly formed in the

E) Therefore, since the Plaintiff and a contracting state whose personal and economic relations are more closely related are not Korea, the Plaintiff is treated as a resident of the United States under the Korea-U.S. Tax Treaty, the instant disposition of capital gains tax is unlawful ( insofar as the instant disposition of imposition of capital gains tax is unlawful, the Plaintiff’s assertion of tax deduction related to penalty tax without filing a tax return cannot

C. Whether the imposition of gift tax of this case is lawful

As seen earlier, the Plaintiff is a resident prescribed by the former Inheritance Tax and Gift Tax Act. All property donated by a resident pursuant to Article 2 of the said Act is subject to the imposition of gift tax, and the Korea-U.S. Tax Treaty only applies to income tax and corporate tax (Article 1(2)(a)). As such, the Plaintiff is obligated to pay gift tax pursuant to the instant donation. Therefore, the imposition of gift tax against the Plaintiff is lawful.

Furthermore, since the instant donation constitutes a donation of property located abroad and the Plaintiff did not report the fact of donation to the tax authority by itself, it constitutes a case where it is difficult for the tax authority to find out the fact of taxation requirements. Thus, even if the amount of additional tax payable by the Plaintiff is somewhat excessive, the grounds alleged by the Plaintiff alone cannot be deemed as an abuse of tax imposition authority. Accordingly, the Plaintiff’

5. Conclusion

The claim of this case is justified within the scope of the above recognition, and the remainder is dismissed as it is without merit. It is so decided as per Disposition.