It is insufficient to conclude that the instant money was in an objective impossible state at the time of commencing the inheritance.

It is insufficient to conclude that the loan was evaluated as at the time of commencing the inheritance, and that there was a situation in which the repayment of the instant money was objectively impossible.

Article 60 of Inheritance Tax and Gift Tax Act: Principles of Appraisal

2016Guhap74705 Revocation of Disposition of Levying Inheritance Tax

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@@세무서장

on 03.03 09

on 04 October 06, 201

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 00,000,000 (including additional tax) against the Plaintiff on June 15, 2015 shall be revoked.

1. Details of the disposition;

A. The deceased BB (hereinafter referred to as “the decedent”) died on December 23, 2013, and there is the Plaintiff and the CCC as the heir of the decedent.

B. On June 11, 2014, the Plaintiff reported and paid KRW 139,165,980,000 after filing a tax base return on inherited property with the taxable value of inherited property KRW 1,696,00,00.

C. The Defendant deemed that DD’s donation of KRW 449,317,600 to May 21, 2012 from August 13, 2009 to May 21, 2012 (hereinafter “the cash of this case”) was made by the decedent, and accordingly, included the said cash amount in the taxable value of inherited property. ② The decedent loaned KRW 100 million to EE on February 28, 201, and KRW 60 million on April 4, 201 (hereinafter “the instant money”), deeming that the amount equivalent to the instant money was also included in the taxable value of inherited property, and thus, deemed that the inheritance tax amount was KRW 2.43,842,00,000,000 to the Plaintiff on June 15, 2015 (hereinafter “the initial notice of penalty tax”).

D. On October 30, 2015, the Plaintiff filed an objection on September 10, 2015, and filed an appeal with the Tax Tribunal on October 30, 2015. On June 8, 2016, the Tax Tribunal rendered a decision that DDR received the cash as compensation for mental and material compensation due to liquidation of a de facto marriage relationship as a de facto spouse of the inheritee, not donation. However, although EE merely borrowed the cash from the decedent, not from the decedent, but from the borrowing of the decedent’s loan claim, it is merely impossible to collect the money. Therefore, “the original disposition of this case is nothing more than the borrowing of the decedent’s loan claim.” The tax base and its tax amount were corrected by excluding KRW 449,317,600 (the cash amount of this case) from the donated property, and the remainder of the claim is dismissed.

E. On August 31, 2016, the Defendant, according to the decision of the Tax Tribunal, excluded KRW 449,317,600, which is the cash amount of the instant case from the taxable value of inherited property, and deemed the taxable value of inherited property as KRW 1,989,109,386, and issued a notice of reduction of KRW 156,158,000 (including additional taxes) of the first disposition of the instant case to KRW 51,390,613 (including additional taxes) of the inheritance tax (hereinafter “instant disposition”).

[Ground of recognition] Unsatisfy, Gap evidence 1 to 4, Eul evidence 1

Each entry, the purport of the whole pleading, including the number

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The amount equivalent to the instant money shall not be included in the taxable value of inherited property for the following reasons.

1) The instant money is not a loan by the decedent to EE, but a donation made by the decedent.

2) Even if the decedent’s lending of the instant money to EE, EE lost the ability to repay, such as closing the business of a private teaching institute operated on March 10, 2014, and thus, it was impossible to collect the said loans.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) From 190,556,593 to the total final tax amount, the Defendant considered the voluntary payment tax amount of KRW 139,165,980 and the notified tax amount of the initial disposition of this case as KRW 156,158,002, and calculated the notified tax amount of KRW 104,767,389.

2) The rectification disposition does not include the initial return or imposition disposition and the separate independent taxation disposition, but the substance thereof changes the original return or imposition disposition and thereby brings about the favorable effect to the taxpayer on the partial revocation of the amount of tax. Accordingly, the subject of an appeal litigation is the remainder of the original return or imposition disposition, which is not revoked by the decision of correction (see, e.g., Supreme Court Decision 95Nu8904, Nov. 15, 1996).

1) On April 16, 2015, the Defendant: (a) deemed EE to have donated the instant money to the decedent; and (b) given notice of the pre-announcement of gift tax to EE; (c) but (d) explained that EE borrowed the instant money from the decedent in connection with the operation of the private teaching institute, the Defendant revoked the pre-announcement of taxation at that time.

2) EE submitted two copies of the following confirmations to the Defendant at the time of the above explanation. On February 28, 201, 201, 100 won was dynafed by personal difficulty. 40,000 won was dynafly loaned 40,000 won as of April 4, 200, 2000 won as of April 1, 200, 2000 won was collected for 00,000 won as of October 11, 200. However, 100 won was 0,000 won as of October 2, 200, 2000 won was 10,000 won as of October 1, 200, 2000 won was 0,000 won, and 00 won was 10,000 won as of October 1, 200, 2000.

3) From July 7, 2012 to 69 (Odong), EE was engaged in a foreign language private teaching institute in an OO-gu Seoul OO-dong, and discontinued its business on March 10, 2014, and was in arrears with approximately KRW 7 million, including global income tax, and the Defendant failed to collect the amount in arrears. The details of the global income tax of EE are as follows:

4) On February 2, 2007, EE completed the registration of transfer of ownership with respect to multi-household 201 located in OOO-dong 307-11 (transaction value: KRW 140 million) on September 19, 2012, EE completed the registration of transfer of ownership with respect to the establishment of a multi-household 201 located in OO-dong 307-11 (transaction value: KRW 160 million) and completed the registration of transfer of ownership with respect to the debtor’s EE and maximum debt amount of KRW 260,000 on September 19, 2012, EE completed the registration of creation of a multi-household 10 on June 25, 2013 (transaction value: KRW 160 million).

5) On March 13, 2014, the EE spouse FF transferred KRW 8 million to the Plaintiff’s account.

6) Business details run by FF are as follows:

[Ground of recognition] Facts without dispute, Gap evidence 1-2, Gap evidence 3, 5, Eul evidence 2 to 6, the purport of the whole pleadings

D. Determination

1) Whether the instant money is a loan

The following circumstances, which are acknowledged by comprehensively taking account of the aforementioned facts of recognition and the overall purport of the arguments, i.e., ① the decedent and EE are members of the same church, and did not appear to be a special relationship. It appears very exceptional that the decedent paid a large amount of KRW 100 million to EE as the intention of donation. ② EE also presents a written confirmation that the instant amount was borrowed from the decedent, ③ the FFF, a spouse of EF, transferred the said amount to the decedent, who is the heir of the decedent, the decedent, on March 13, 2014, after the decedent’s death. The Plaintiff asserted that the said amount was due to monetary transactions between the Plaintiff, EE, and FF, who is not related to the decedent. However, in light of all circumstances such as no data about the fact that the said amount was based on a separate monetary transaction between the Plaintiff and EE, etc., the Plaintiff’s assertion that this part of the instant amount was legitimate and acceptable. Accordingly, the Plaintiff’s disposition of EFF, therefore, is justified.

2) Whether a loan claim equivalent to the instant money is impossible to collect

According to Article 60(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 14388, Dec. 20, 2016), the value of the property on which inheritance tax is levied shall be based on the market price as of the date of inheritance commencement. According to the proviso of Article 58(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, where all or part of the claims, such as loans, non-commercial sales, and bills, etc., are deemed to be irrecoverable as of the base date of appraisal, such value shall not be included in the value of inherited property. Thus, the term “unretriable amount” refers to

On the other hand, since the impossibility of collecting claims is binding on exceptional grounds in determining the taxable value of inherited property, the burden of proof for such special grounds shall be deemed to exist on the person liable for duty to pay taxes (see, e.g., Supreme Court Decision 94Nu9719, Mar. 14, 1995).

In light of the following circumstances, i.e., (i) EE had operated a foreign language research institute from July 7, 2012 to March 10, 2014, which was the commencement date of the inheritance; (ii) EE appears to have been operating the said private teaching institute on December 23, 2013; (iii) global income amount belonging to 2013 was approximately KRW 39 million; (iv) global income amount belonging to OO-dong 307-11, which was owned by it around June 25, 2013, 2000 won was either KRW 160,000 or KRW 200,000,000,000, which was established at the time of sale of KRW 26,000,000,000,000,000 won, and there was no objective evidence that the deceased’s spouse’s death was determined at the time of the commencement of the inheritance; and (iv) it did not have been determined otherwise by the Plaintiff’s death.

Therefore, we cannot accept this part of the Plaintiff’s assertion.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.