Seoul High Court 2008Nu8378 (2009.01)

National High Court Decision 2005No1473 ( December 11, 2006)

If the contributor, etc. used or made profits from the land as the site of the building after being contributed, the land is subject to gift tax.

If a school foundation allows contributors and their relatives to use or benefit from land as a site for a building after receiving a contribution, land is subject to gift tax, and the offering of a building for the plaintiff as a physical collateral cannot be deemed as having a relationship with the use or profit-making of land, so it cannot be excluded from gift tax.

Article 48 of the Inheritance Tax and Gift Tax Act

Article 39 of the Enforcement Decree of Inheritance Tax and Gift Tax Act

209Du17575 Revocation of Disposition of Imposing gift tax, etc.

-Appellee

School Foundation XX private teaching institutes

-Appellant

O Head of tax office

Seoul High Court Decision 2008Nu8378 Decided September 1, 2009

October 13, 2011

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court.

The plaintiff's appeal is dismissed.

The grounds of appeal are examined.

1. As to the Defendant’s ground of appeal

A. Article 48(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter "the Inheritance Tax and Gift Tax Act") provides that "the value of property contributed by a public-service corporation shall not be included in the taxable value of the gift tax." The main sentence of Article 48(3) provides that where a public-service corporation allows its contributors and their relatives to use or profit from the property contributed by it by means of lease, loan for consumption or loan for use pursuant to Article 48(1), the value prescribed by Presidential Decree shall be deemed a donation by the public-service corporation, etc. and the gift tax shall be levied immediately on the property." Article 39(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter "Enforcement Decree of the Inheritance Tax and Gift Tax Act") provides that the value of the property contributed is lower than that of the property in question.

B. According to the reasoning of the lower judgment and the evidence duly admitted by the lower court, (1) while new AB decided to donate the instant land owned by it to the Plaintiff on February 13, 198, the Plaintiff filed a lawsuit against new BA, claiming the implementation of the procedure for the registration of ownership transfer; (2) the Plaintiff’s new construction of the instant land owned by the Plaintiff and the instant land owned by the new BB to 00,000, after the judgment in favor of the Plaintiff was finalized on December 13, 1999 when the new BB and the newCC died on February 21, 1997; and (3) the ownership transfer registration was made in the name of the Plaintiff on February 9, 200 with respect to the instant land; and (2) the new building owned by the Plaintiff to 300,000,0000,0000,0000,0000,0000,0000,000,0000,000,00.

C. Examining these facts in light of the aforementioned provisions, since the Plaintiff received a contribution of the instant land and let the contributor and his relatives use it as a site for the instant building, the instant land may be subject to gift tax pursuant to the main sentence of Article 48(3) of the Inheritance Tax and Gift Tax Act. However, if the newB offered the said three buildings for the Plaintiff as a physical collateral, if the said three buildings were to be offered as a physical collateral for the Plaintiff, the portion equivalent to the price of the instant land should be excluded from the subject of gift tax pursuant to Article 39(3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act.

However, as seen in the above facts, since the commercial house in this case owned by the newB was already existing on the ground at the time when the Plaintiff was donated the land, it appears that the newB, which is the position of the donor, did not intend to pay a separate price for continuing to use and profit from the part of the land in this case as the site of the commercial house in this case. In fact, it appears that there was no agreement between the Plaintiff and the newB to pay the price for the use and profit-making of the land in this case. Furthermore, even if the newB offered the above three buildings for the Plaintiff, it is merely the provision of the common security necessary for the Plaintiff to obtain the loan, and it does not seem that the Plaintiff’s economic profit was used and profit-making period of the land in this case. Moreover, if it is recognized as the price for the use and profit-making of the land in this case, it cannot be said that the person who contributed to the public interest corporation would not be subject to a comprehensive taxation of the property in this case, and if it offered the property in this case, it could not be subject to the Plaintiff’s new property in this case.

Nevertheless, the court below held that the newB offered the above three above three as a physical collateral is in a quid pro quo relationship with the use and profit-making of the land of this case, and thus, gift tax should be imposed only on the portion equivalent to the difference between the legitimate cost of use and profit-making and the economic profit-making due to the provision of physical collateral among the value of the land of this case, and further, the difference should be included in the gross income in calculating the plaintiff's income. In so doing, the court below erred by misapprehending the legal principles on interpretation and application of Article 48 (3) of the Inheritance Tax and Gift Tax Act and Article 39 (3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which affected the conclusion

2. Plaintiff’s ground of appeal

The Plaintiff’s ground of appeal is without merit to find facts that fall under the exclusive jurisdiction of the lower court, which is a fact-finding court, or only when it comes to the final appeal, and thus, cannot be a legitimate ground

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal by the defendant, the part against the defendant among the judgment below is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The plaintiff's appeal is dismissed. It is so decided as per Disposition by the assent of