Whether a nominal trust property deemed donated under the Inheritance Tax Act is included in the "value of assets received free of charge" under the Corporate Tax Act (negative)

The legal fiction provision of Article 32-2 (1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) is applicable only to the case where gift tax is imposed. In such a case, there is no provision which is deemed as taxable income under the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998). As to whether the assets are included in "value of assets received without compensation" under the same Act, the determination shall be made in accordance with the substance of the substance over form principle under Article 3 of the same Act. Thus, the assets of the relevant corporation with registration, record, transfer of title, etc. upon entrustment of name cannot be deemed as including assets with the registration, transfer of title, etc., and thus, the title trust is for tax avoidance, and even if the trustee is not a profit-making corporation, even if assets subject to gift tax are deemed as donated, it cannot be viewed as different in the principle of no taxation without law and the substance over form principle.

Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see current Article 41-2(1) of the Inheritance Tax and Gift Tax Act), Articles 3 (see current Article 4), 9(2) (see current Article 15) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998), Article 12(1)6 (see current Article 11 subparag. 5) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

Dae Jin Co., Ltd. (Law Firm Uperus, Attorneys Kang Dong-ho et al., Counsel for the plaintiff-appellant)

Head of Sungbuk Tax Office

Seoul High Court Decision 2000Nu6536 delivered on April 24, 2001

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The legal fiction provision of Article 32-2 (1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) can only be applied to cases where gift tax is imposed. In such a case, the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998; hereinafter the same shall apply) does not provide for the legal fiction of gross income. Thus, as to whether the assets are included in the "value of assets received without compensation" under the former Corporate Tax Act, the determination shall be made in accordance with the substance of the substance over form principle under Article 3 of the former Corporate Tax Act. Thus, assets which the relevant corporation received under the name of entrustment, registration, transfer of title, etc. are not included in the assets for which the relevant corporation received a registration, transfer of title, etc., and thus the title trust is for the avoidance of tax, even if the trustee is deemed to have donated assets not for a profit-making corporation, it cannot be viewed as different from the principle of no taxation without law and no taxation without law (see Supreme Court Decision 96Nu657.

According to the reasoning of the judgment below, the court below acknowledged the facts as stated in its judgment, and determined that the value of the real estate of this case cannot be included in the plaintiff's gross income, on the ground that the non-party acquired the real estate in this case from January 10, 1980 pursuant to the payment in substitutes agreement and entrusted the ownership registration to the plaintiff for the purpose of tax avoidance, and the non-party did not contribute the real estate of this case to the plaintiff.

In light of the above legal principles and records, the above recognition and judgment of the court below are just, and there is no violation of the rules of evidence as otherwise alleged in the ground of appeal.

Therefore, the appeal is dismissed and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jae- Jae (Presiding Justice)