Cho High Court Decision 2009Da3972 ( October 11, 2010)

Disposition of taxation of capital gains tax by deeming land owned by a sole owner

In light of the fact that part of the land purchase fund is a third party, part of the sale fund was deposited into a third party, and the parties also stated to an investigation agency that the Plaintiff did not purchase the land of this case solely, it is difficult to deem that the Plaintiff purchased and owned the land solely

2011Revocation of disposition of revocation of imposition of capital gains tax

XX Kim

O Head of tax office

August 25, 2011

September 22, 2011

1. The Defendant’s disposition of imposing KRW 82,546,500 on the Plaintiff on July 31, 2009 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On September 11, 2008, the Busan regional tax office, under the name of the formerA on December 11, 2002, sold the sales price of KRW 160 million to the former BB on May 10, 2003, while the Busan XX-dong 000 Do 000 Do 2975 Do 2000 Do 20000 Do 20000 Do 20000,000, issued a prior notice of taxation of KRW 217,839,310 for the taxable year 2003 to the formerA on November 7, 2008.

(B) On December 12, 2008, the formerA filed a request for pre-assessment review by asserting that he is not the actual owner of the above land, and the Busan Regional Tax Office, upon the above request, conducted an investigation, the Plaintiff: (a) determined each transfer value of the pertinent land at KRW 41,2930,000,000,000, and UCC at KRW 127,000,000,000; and (b) notified the Defendant of taxation data on the ground that the pertinent land is merely a title trust to the formerA after the joint purchase by the Plaintiff and UCC; and (c) the Defendant imposed each transfer income tax of KRW 52,813,00 on the Plaintiff on March 19, 209.

D. On May 26, 2009, the Plaintiff filed an objection with the purport that “The instant land was owned solely by UCC, and that it was irrelevant to the said land.” The Busan Regional Tax Office, as a result of a reinvestigation, notified the Defendant of taxation data to the effect that “The Plaintiff is the sole ownership, contrary to the Plaintiff’s assertion as to the above discussion.”

E. Accordingly, the Defendant determined the transfer value of the instant land as KRW 540 million, and the acquisition value as KRW 360 million. On July 31, 2009, the Defendant notified the Plaintiff of the reduction of the transfer income tax for the year 2003 from KRW 169,463,29 to KRW 82,546,50 (hereinafter “instant disposition”).

F. The Plaintiff dissatisfied with the instant disposition and filed an administrative litigation with the Tax Tribunal on October 13, 2009, but was dismissed on October 11, 2010.

[Ground of recognition] Facts without dispute, Gap evidence 1, 5, 6, Eul evidence 1 (including branch numbers in case of a natural disaster; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant land was purchased independently by the UCC and was trusted in the name of the JCCA, and the Plaintiff was merely lent KRW 160 million by the request of the UCC.S., but the Defendant deemed the Plaintiff as the actual owner of the said land and disposed of the instant land. Thus, the said disposition should be revoked by unlawful means.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) The source of the instant land purchase fund of KRW 360 million identified by Busan Regional Tax Office and the grounds for understanding that the said land was owned solely by the Plaintiff are as follows.

A) Of the purchase fund, KRW 160 million is the money withdrawn from the account of the Plaintiff, the Plaintiff’s wife, and MaE, with a check, etc., and the remaining KRW 200 million is the money withdrawn from the account of the UCC and ASEAN’s UF.

B) However, Busan Regional Tax Office stated that the purchase fund of KRW 200 million was lent at the Plaintiff’s request, and determined that the instant land was owned solely by the Plaintiff on the ground that the check from the UCC was endorsed on the check from the part of the purchase fund.

2) On September 2009, the Plaintiff submitted a complaint to the Busan District Prosecutors' Office to the effect that, although the land of this case was owned solely by the UCC, the UCC, upon commencement of an investigation by the Busan District Tax Office, submitted a complaint to the effect that it interfered with tax officials' investigation by purchasing relevant persons and making the Plaintiff make a false statement as the actual owner of the land

3) The Busan District Prosecutors' Office started an investigation according to the above accusation, and confirmed the flow of the above land sales fund of KRW 540 million as follows.

A) down payment of KRW 18 million was deposited in two accounts of UCC on March 18, 2003, each of KRW 70 million, and KRW 23 million, respectively, and the remainder of KRW 15 million was deposited in YB’s account in the name of YB.

B) Of the intermediate payment of KRW 162 million, KRW 145 million deposited in the UCC’s account on April 10, 2003, KRW 15 million deposited in the HH and Kim K’s account, each of which brokered the sale of the instant land, KRW 5 million and KRW 10 million.

C) The remainder KRW 270 million was divided into the accounts in the name of the UCC 40 million and KRW 230 million deposited in the accounts in the name of leE on May 10, 2003.

4) In addition, on January 5, 2010, under investigation conducted by the prosecution, the UCC was jointly purchased by the UCC and the Plaintiff, and the Plaintiff stated that the Plaintiff purchased the land in the course of the National Tax Service’s investigation was a false statement.

5) In full view of the investigation results as seen above and the statements of related persons, Busan District Prosecutors’ Office prosecuted the Busan District Court on June 29, 2010 on the following facts: (a) the instant land was owned solely by the UCC, but the UCC interfered with tax officials’ tax investigation by using various deceptive means; and (b) on the other hand, the Busan District Court prosecuted the UCC

6) On February 22, 2011, the Busan District Court rendered a false statement that the instant land was purchased by the Plaintiff solely in the course of the tax investigation, and submitted false data to related persons. However, even if the person subject to investigation makes a false statement, the duty and responsibility to determine the credibility of the statement is to a tax official, and it cannot be deemed that a tax official’s legitimate duty of taxation has been interfered with through the deceptive scheme of the UCC, and the appeal is currently pending.

[Ground of recognition] Gap evidence Nos. 1, 2, 3, 4, 5, 6, 8, 9, Eul evidence Nos. 1 through 14, and the purport of the whole pleadings

D. Determination

1) Issues

Article 14 of the Framework Act on National Taxes provides that "if the ownership of income, profit, property, act, or transaction subject to taxation is nominal, and there is a person to whom it actually belongs, the person to whom it actually belongs shall be liable to pay taxes." Thus, if the nominal owner and the actual owner of real estate are different, the actual owner should be deemed to be the person to whom it actually belongs and the actual owner should be liable to pay capital gains tax. Thus, the plaintiff claims that the actual owner of the land of this case is the sole owner of UCC, and the defendant disposition of this case by deeming only the plaintiff as the actual owner of the land of this case. Thus, the issue

2) Whether the Plaintiff owned the instant land solely

In light of the following circumstances in full view of the above facts, i.e., the source of KRW 200 million out of the purchase fund of the instant land is the UCC, considerable part of the sale fund was deposited into the UCC account, and the UCC also stated in the UCC investigation agency that the instant land was not purchased by the Plaintiff alone, and that the formerA, Kim KK, and LH were falsely stated to the actual owner of the instant land in the course of the Busan regional tax office’s investigation, it is difficult to deem that the Plaintiff purchased the said land solely and actually owned it, and there is no other evidence to acknowledge otherwise.

3) Sub-decisions

Therefore, the instant disposition taken on the premise that the actual owner of the instant land is the Plaintiff’s sole owner is unlawful.

In addition, capital gains tax on the above land shall be determined according to the relation between the UCC and the Plaintiff, or whether the owner of the above land is a UCC and the Plaintiff, and if the land is owned jointly. However, the statements made by the Plaintiff and UCC are different, and the records of this case are complicatedly connected without clear materials, and it is difficult to determine whether to impose capital gains tax on the Plaintiff or not, and to determine whether to impose capital gains tax on the Plaintiff, the entire disposition of this case imposed against the Plaintiff should be revoked.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.