Where property subject to gift tax and exempted property are donated by different timing, the method of calculating the amount of gift tax on property subject to gift tax.

In a case where a gift tax is exempted on farmland donated pursuant to Article 67-7 (1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4666 of Dec. 31, 1993), such exemption is to extinguish the part of the gift tax, unlike the case where farmland is exempt from taxation. In addition, in calculating the amount of gift tax on property subject to gift tax, among the donated property, the amount of gift tax shall not be calculated by taking the value of the property subject to gift tax, excluding the portion to be exempted from the beginning, as its tax base, in light of the structure of the gift tax where the subject of gift tax is included in the subject of a gift tax, and the amount of gift tax shall not be calculated by taking the value of the property subject to gift tax, excluding the portion to be exempted from the beginning. The method of deducting the amount of gift tax on the whole value of the donated property is to be taken, and the method of calculating the amount of gift tax on the property subject to gift tax is to be applied to the method of calculating the same amount of gift tax within five years.

Article 67-7(1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4666 of Dec. 31, 1993); Article 55-5(1) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 14084 of Dec. 31, 1993); Article 31(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see current Article 53 of the Inheritance Tax and Gift Tax Act)

[Plaintiff-Appellant] Plaintiff 1 and 2 others (Law Firm Han, Attorneys Han-soo et al., Counsel for plaintiff-appellant)

[Judgment of the court below] The grounds for appeal are examined.

Head of Namyang District Tax Office

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The Defendant’s disposition of imposing gift tax amounting to KRW 31,509,460 against the Plaintiff on November 13, 1998 shall be revoked.

1. Details of the disposition;

The following facts are acknowledged in light of the whole purport of the pleadings in the evidence Nos. 1, 3, 5, 6, 9 through 11 (the evidence No. 10 of the A, and the evidence No. 11 of the A, No. 6 of the evidence No. 9 of the evidence No. 2, 4, 7, and 8 of the evidence No. 1, 2, Eul No. 1, 7, 8 of the evidence No. 1, 7, 8 of the evidence No. 1, 2 through 5, and 10 of the evidence No. 1, respectively:

A. On June 30, 1993, the Plaintiff: (a) donated 50-1 forest land in Geum-dong, Geum-dong, Geum-si, Geum-si (hereinafter “the forest land in this case”); and (b) reported and paid the gift tax of KRW 18,382,250 to the Plaintiff with its value as KRW 92,529,000.

B. However, on December 6, 1993, the Plaintiff received a donation of farmland 26,052 square meters (hereinafter collectively referred to as “the instant farmland”) on 13 lots of land, other than 3,398 square meters, in the Gu-si 782-5 square meters from Gu-si 782, Gu-si, Gu-si 782. Upon filing a gift tax return on December 28, 199, the Plaintiff filed a gift tax return on KRW 1,598,825,000 for the value of the instant farmland and KRW 895,812,400 for the gift tax calculated by adding the value of the instant woodland to KRW 92,529,00,000 for the value of the gift tax, KRW 1,529,00 for the value of the farmland and KRW 305,000 for the self-employed farmer who is a lineal descendant, the Plaintiff filed a tax exemption return on the said value of the relevant farmland, and submitted tax exemption statements to the Defendant.

C. However, on June 16, 1995, the Defendant additionally imposed and notified KRW 893,294,080, which deducted the already paid tax from the Plaintiff on the report, on the ground that the Plaintiff was not a self-employed farmer as prescribed by the Cho Jae-gu Act, and the Plaintiff filed a lawsuit seeking revocation of the above disposition against the Defendant, and the judgment in favor of the Plaintiff that the above disposition was revoked from the Seoul High Court on September 20, 1996, was affirmed by the dismissal of the Defendant’s appeal by the Supreme Court on March 28, 1997.

D. Accordingly, in calculating the amount of the gift tax on the plaintiff newly established in accordance with the above final judgment, the defendant determined the amount of the gift tax on the plaintiff 895,812,400 won based on the total value of donated property, 846,805,139 won [1,595,812,400 x 1,598,825,000 x 1,529,529,000 x 1,598,825,000 x 598,825,00)] as the amount of the gift tax reduced or exempted by the reduction of the amount of the gift tax and the amount of the tax reported, 3,062,50 won, 18,382,250 won, and 27,562,562,50 won (89,85,80,408,408,396,5396,136,405-6,405

2. Whether the disposition is lawful;

A. The plaintiff's assertion

As the cause of the instant claim, the Plaintiff asserted that the Defendant’s calculation method of the abated or exempted tax amount was erroneous for the following reasons and sought revocation of the instant disposition as unlawful.

(1) A tax exemption under the tax law is cancelled to cancel a tax payment obligation, and in this case, the tax liability is extinguished, and the purport of Article 67-7(1) of the Special Act is that, as the obligation of a self-employed farmer to exempt the gift tax on the farmland donated to him is extinguished, the donee of farmland does not need to pay the gift tax in entirety due to the donation of farmland. In other words, the farmland should be treated as the donation of farmland and the farmland is not subject to the gift tax. Thus, as in this case, if the farmland of this case, which is subject to the gift tax, is re-entrusted after the donation of the forest of this case, which is subject to the gift tax, is calculated according to the Defendant’s calculation, the application of the progressive tax rate due to the increase in the value of the donation, thereby making it a result of paying the gift tax on the farmland of this case, which is to be exempted,

(2) If the disposition of this case is deemed to be pertaining to the forest of this case, not to the gift tax on the farmland of this case exempted from the gift tax, but to the original donation, according to Article 31-3 (2) of the former Inheritance Tax Act (amended by Act No. 5193, Dec. 30, 1996; hereinafter referred to as the "Act"), the amount calculated by deducting the tax amount already paid or payable from the value of the first donation shall be imposed as the tax amount. Thus, if the plaintiff imposed the disposition of this case on the first donation as the gift tax on the first donation, it shall not be deemed to be a violation of the above provision, but it shall be deemed to be a retroactive taxation on the first donation. In addition, Article 31-3 (1) of the same Act provides that if the sum of the value of the property received from the same person within five years prior to the relevant donation is more than 10,000 won, the purport of imposing the gift tax on the aggregate of the value of the donation shall be added to the gift tax if it is subject to the next donation.

(3) In the calculation of a exempted tax amount, if the method of calculating the exempted tax is applied to the method of calculating the exempted tax by multiplying the tax base amount calculated based on the aggregate of the exempted income and the exempted income, by the ratio of the exempted income to the total income, the special provisions, such as Article 6(1) of the Income Tax Act or Article 11(1) of the Enforcement Decree of the Corporate Tax Act, are provided. In the case of a gift tax exemption without such special provisions, the determination of the exempted tax amount by calculating it by the method of

(b) Markets:

Therefore, in a case where a gift tax is exempted on farmland donated pursuant to Article 67-7 (1) of the Gacing, such exemption is limited to extinguishing the portion of the gift tax, unlike the case where farmland is exempt from taxation. In addition, in calculating the amount of gift tax on property subject to gift tax, among the donated property, in light of the structure of the gift tax to which the progressive tax rate is applied, the amount of gift tax shall not be calculated by using only the value of the subject of taxation excluding the portion to be exempted from the beginning. In calculating the total amount of gift tax on the value of the donated property, the method of deducting the amount of gift tax on the total value of the donated property should be determined (see Supreme Court Decision 98Du11328, Oct. 13, 198). Since the Plaintiff’s assertion that the amount of gift tax is exempted from the gift tax on the donated property cannot be applied to the case where the total value of the donated property exceeds the amount of gift tax to be exempted from the gift tax on the donated property under the Gacing method, as in light of the purport of the Gacing method of the gift tax on the gift tax.

3. Conclusion

Therefore, since the disposition of this case is lawful, the plaintiff's claim seeking revocation is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Jong-il (Presiding Judge)