Plaintiff (Law Firm Dongdong, Attorneys Choi Jong-chul et al., Counsel for the plaintiff-appellant)

The director of the tax office

November 18, 2010

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of gift tax of KRW 364,532,860 against the Plaintiff on April 1, 2009 shall be revoked.

1. Details of disposition;

A. On May 3, 2003, the plaintiff and the non-party 1 (the non-party to the judgment of the Supreme Court) who are the plaintiff and the non-party 1 (the non-party to the judgment of the Supreme Court) purchased on the joint purchase from the non-party 2 the aggregate of 7,773 square meters of the three pieces of farmland located in Seosan-dong (number 1 omitted), (number 2 omitted), (number 3 omitted), and (number 3 omitted, and completed the registration of ownership transfer (the plaintiff 1/3 shares and the non-party 12/3 shares) on June 4, 2003.

B. On December 29, 2006, the Plaintiff donated Nonparty 1’s share (2/3) in the farmland of this case from Nonparty 1.

C. On March 28, 2007, the Plaintiff, as a farming child, filed an application for reduction of or exemption from gift tax pursuant to Article 58(1)1(a) of the former Regulation of Tax Reduction and Exemption Act (wholly amended by Act No. 5584, Dec. 28, 1998; hereinafter the same), Article 57(1) and (2) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (wholly amended by Presidential Decree No. 15976, Dec. 31, 1998; hereinafter the same), Article 15(2) of the former Restriction of Special Taxation Act (amended by Act No. 5825, Feb. 8, 199); and

D. On April 1, 2009, the Defendant rendered a disposition imposing gift tax of KRW 364,532,860 on the Plaintiff (hereinafter “instant disposition”) by determining that the instant farmland is not subject to the said provision.

E. The Plaintiff filed an appeal with the Tax Tribunal on July 8, 2009 on the instant disposition, but the Tax Tribunal rendered a ruling dismissing the Plaintiff’s claim on October 5, 2009.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, 3, Eul evidence 1 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The party's assertion

1) The defendant asserts that since the plaintiff did not engage in direct farming for two or more years retroactively as of January 1, 1999, the enforcement date of the former Restriction of Special Taxation Act, the farmland in this case does not fall under the subject of exemption of gift tax.

2) As to this, the Plaintiff asserted that the Plaintiff’s disposition of this case, based on the premise that the Plaintiff is not a farming child, is illegal even though the Plaintiff was directly engaged in farming for at least two years retroactively from the date of donation of the farmland of this case as well as from the date of January 1, 1999, which was the enforcement date of the former Restriction of Special Taxation Act, because the Plaintiff received the donation of the farmland of this case from the farming child to the self-employed farmer.

B. Key statutes

It is as shown in the attached Form.

C. Determination

1) In light of the principle of no taxation without law, or the requirements for tax exemption or exemption, the interpretation of tax laws shall be interpreted as the text of the law, barring any special circumstances, and it shall not be permitted to expand or analogically interpret without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret the provisions that can be seen as clearly preferential provisions among the requirements for tax exemption or exemption (see Supreme Court Decision 2003Du7392, May 28, 2004).

Article 15(2) of the Addenda to the Restriction of Special Taxation Act provides that gift tax shall be exempted pursuant to the former Tax Reduction and Exemption Control Act for farmland, etc. subject to exemption of gift tax pursuant to Article 58(1) of the former Tax Reduction and Exemption Act at the time of enforcement of the same Act, and Article 57(1) and (2) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act for one of the requirements for farming children who are exempt from gift tax on donated farmland, and one of the requirements for farming children who are exempted from gift tax on the donated farmland for at least two consecutive years retroactively from the date of donation of the relevant farmland.

Article 15 (2) of the Addenda to the Restriction of Special Taxation Act provides that when a farming child under the former Regulation of Tax Reduction and Exemption Act was abolished, it can be seen as a transitional provision prepared to protect a person’s right to obtain a gift tax prior to January 1, 199. If the purpose of stipulating the requirements for farming children only on the basis of the date of donation is to prescribe the requirements for farming children, it would be sufficient to delay the implementation of the abolition of the gift tax exemption system on the farmland, etc. donated to the farming child under the legislative technology. However, in full view of the fact that the above supplementary provision provides for “farmland, etc. subject to exemption from gift tax under the former Restriction of Special Taxation Act at the time of the enforcement of the former Restriction of Special Taxation Act,” Article 15 (2) of the Addenda to the former Restriction of Special Taxation Act provides for “the farmland, etc. subject to exemption from gift tax under the former Restriction of Tax Reduction and Exemption Act at the time of the enforcement of the above Act, it shall be interpreted as exempt from gift tax by 19 days, as well as 9.

2) In the case of tax exemption that cancels the tax liability established after the fact under the provisions of law, the taxpayer must prove that the taxable object is the object of exemption (see Supreme Court Decision 68Nu161, Oct. 8, 1968). Meanwhile, the farming child under the former Regulation of Tax Reduction and Exemption Act refers to a person who manages and cultivates the farmland, etc. under his own responsibility without entrusting or lending it to another person, and even if he concurrently engages in other occupation as long as he is engaged in the direct farming, he shall be deemed to be a farming child (see Supreme Court Decision 98Du9271, Sept. 22, 1998).

In this case, as to whether the Plaintiff met the above requirements for farming children around January 1, 1999, each of the statements in Gap evidence Nos. 4 through 9, 14, 18, and 19 (including each number) is insufficient to recognize that the Plaintiff continued to engage in farming for a period of two years retroactively from the above date, and there is no other evidence to support this.

Rather, in full view of the purport of the entire pleadings in the statements Nos. 3 and 4 (including each number), the following facts and circumstances can be acknowledged.

① The Plaintiff’s earned income reported was 2,438,90 won, 26,898,000 won, 1997, 16,120,795 won, 22,02,953 won, 21,132,971 won, 200, 373 won, 15, 198, 400, 16, 1997, 160, 160, 1998, 150, 1997, 198, 190, 195, 190, 195, 190, 195, 190, 190, 16, 190, 196, 190, 196, 196, 190, 196, 200, 196, 196, 190.

위 인정사실에 의하면, 원고는 1993년경부터 2000년경까지 남광토건 등에 근무하였고, 1996. 8. 19.부터 2003. 6. 30.까지 □□목욕탕을 운영하였는데, 근로소득액 및 사업소득액수에 비추어 볼 때, 설령 원고 주장과 같이 원고가 위 기간 동안에도 틈틈이 농지를 경작했다고 하더라도 이는 위 회사의 직원으로서 그 업무에 전념하거나 위 목욕탕 영업에 종사하면서 농업을 간접적으로 경영하였던 것에 불과하다고 판단되므로, 1999. 1. 1.을 기준으로 소급하여 2년 이상 계속하여 직접 영농에 종사하고 있지 않았다고 보아야 할 것이다.

Therefore, as of January 1, 199, the Plaintiff did not meet the requirements for farming children under the former Regulation of Tax Reduction and Exemption Act and the Enforcement Decree of the same Act as of January 1, 1999, and since the farmland of this case was not owned by Nonparty 1, a donor at the time of January 1, 1999, the Defendant’s disposition of this case under the premise that the farmland of this case does not fall under the subject of exemption from gift tax under each of the above provisions is lawful, without considering whether it satisfies the requirements for farming children as of January 1, 199.

3. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit.

[Attachment Form No. 3]

Judges Yoon Jong-gu (Presiding Judge)