Suwon District Court-201-Gu Partnership-16255 (Law No. 207.20)

Appropriateness of a disposition imposing gift tax

The instant repayment does not constitute an interest arising from the discharge, acceptance or repayment, in a case where a creditor is exempted from a debt, or where a third party is given an acceptance or repayment of a debt.

2012Nu24575 Revocation of Disposition of Imposition of Gift Tax

○ Kim

Head of Si Tax Office

Suwon District Court Decision 2011Guhap16255 Decided 2012.07.20

2013.06.18

2013.07.26

1.The judgment of the first instance, including the claims extended in the trial, shall be modified as follows:

A. On June 18, 2012, the part of the Defendant’s imposition of KRW 382,038,917, which exceeds KRW 37,494,60, among the disposition imposing gift tax on the Plaintiff, shall be revoked.

B. The plaintiff's remaining claims are dismissed.

2. 1/10 of the total litigation costs shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

The judgment of the first instance shall be amended as follows:

The Defendant imposed a total of KRW 382,038,917 on the Plaintiff on June 18, 2012.

The part exceeding 3,300,000 won shall be revoked.

【Plaintiff extended the purport of the claim in the trial of the party】

1. Imposition of gift tax;

The following facts shall be acknowledged in full view of the purport of the entire pleadings in the evidence Nos. 1 and Nos. 1 to 5.

[1]

Around May 2011, the Defendant conducted a tax investigation with respect to the Plaintiff and his father Kim ○○, and determined that the Plaintiff donated KRW 1.19 billion from Kim○ on September 17, 2010. Accordingly, on August 10, 2011, the Defendant imposed gift tax of KRW 381,398,400 on the Plaintiff.

[2]

On December 27, 2011, the Plaintiff filed the instant lawsuit and sought revocation of the said disposition.

During that period, the Defendant donated KRW 190 million from Kim○ on December 29, 2009, the Plaintiff donated KRW 210 million from Kim○○ on September 17, 2010, and subsequently donated KRW 980 million from Kim○ on September 17, 2010.

Accordingly, on June 18, 2012, the Defendant issued a disposition imposing gift tax of KRW 344,544,317 on KRW 382,03,917 on KRW 200,000,000,000,000, and KRW 344,544,317, totaling KRW 382,038,917 on the Plaintiff (hereinafter “instant disposition”).

2. The plaintiff's assertion

The Plaintiff and his father Kim ○-○, ○○-dong 115-4, 115-6, 481.6 square meters, were purchased at ○○○-si, ○○○○-si, and an agreement was made to newly construct and distribute profits by operating the telecom. In such a joint project, the Plaintiff’s shares were 30% and 70% of the shares of Kim○-○.

Of the purchase price of the above land KRW 1.19 billion, KRW 980 million was paid as KRW 980,000,000,000 that the Plaintiff borrowed from ○○ Cooperative as collateral, and the remaining KRW 210,000,000 was paid as money raised by ○○○. After that, the Plaintiff and ○○ paid KRW 980,000,000 to ○○ Cooperative as part of KRW 2.1 billion borrowed from ○○ Bank as collateral for ○○ Cooperative’s loan obligations against ○○ Cooperative.

Therefore, the Plaintiff received a donation of KRW 63 million equivalent to the Plaintiff’s share of KRW 300 million among the above KRW 210 million from Kim○○, and thus, the Plaintiff’s gift tax payable by the Plaintiff is KRW 3.3 million. Therefore, the Plaintiff seeks revocation of the part exceeding KRW 3.3 million out of the instant disposition.

3. Facts of recognition;

[1]

On October 27, 2009, the Plaintiff entered into a contract with ○○○○○○○-dong 1115-4, 48 (hereinafter “instant land”) to purchase the instant land at KRW 1190 million. Kim○○-dong on November 17, 2009, 1.274 billion with the maximum debt amount, KRW 1.74 million with the ○○○-dong 1115-4, and KRW 48 (hereinafter “the instant land”). On November 20, 2009, the Plaintiff completed the registration of creation of a collateral security (hereinafter “○○○”) with the ○○○-si ○○○○-dong ○○○○-dong 1115-4, 200,000 won, and paid the said loan to ○○○-○ on the said land as part of the purchase price [the Plaintiff completed the registration of ownership transfer with the purchase price for the instant land under the name of ○○-○○○’s father on December 29, 29, 20000.

On the other hand, the Plaintiff entered into the above contract with Kim○, and obtained a building permit to build a telecom on the instant land in the name of Kim○○○, and completed the procedure to change the name of the owner to the Plaintiff on December 9, 2009. On the other hand, the Plaintiff recommended the representative director of ○○ Communications Co., Ltd., working for the Plaintiff, to newly construct and operate the telecomtour on the instant land, and recommended the Plaintiff to make an investment. On December 29, 2009, the Plaintiff completed the registration of establishment of the right to collateral security, which is the debtor, for the instant land, KRW 80 million with the maximum debt amount, and the establishment of the right to collateral security, from November 2009 to April 2010.

[3]

On March 30, 2010, the Plaintiff and ○○○ contracted the construction of a new franchise (hereinafter referred to as the “the instant franchise”) on the instant land, and paid the construction cost, etc. for the said new construction with the money invested by KimA. around May 14, 2010, Kim○ completed the procedure for changing the name of the owner of the instant franchise from the Plaintiff to himself/herself. On July 26, 2010, the Plaintiff and ○○○ completed the registration of ownership transfer of the instant franchise in the name of Kim○○ on July 29, 2010. around August 4, 2010, Kim○ completed the registration of ownership transfer on the instant franchise in the name of the instant mother. around July 29, 2010, Kim○ drafted the instant franchise and trade name, and completed the registration of the business on July 28, 2010 with the date of the instant franchise and the date of its opening on July 28, 2010.

[4]

Of that, as seen earlier on August 26, 2010, Kim○○○○○ University cancelled the registration of establishment of a collateral security right of KRW 800 million with respect to the instant land. Meanwhile, on September 16, 2010, the Plaintiff and Kim○○○○ Bank concluded a collateral security contract with ○○○○○ Bank, which provides joint collateral security right with the instant land. As seen earlier on September 17, 2010, ○○○○○○○○○○○ Bank revoked the registration of establishment of a collateral security right of KRW 1.27 billion with respect to the instant land and KRW 1.4 billion with respect to 0 billion with respect to ○○○○○○○○ Bank’s loan of KRW 20 billion with the above maximum debt amount of KRW 1.8 billion with respect to ○○○○○○ Bank’s loan of KRW 9 billion with the above maximum debt amount of KRW 1.8 billion with respect to 2 billion with respect to the instant land.

[5]

Around August 4, 2010, 2010, ○○○○ completed the Stockholm of a business operator, etc. using the instant her place of business as the instant her joint place of business. As seen earlier, the head of ○○ Tax Office corrected that the ○○○ and the Plaintiff was a joint place of business on May 31, 201. Kim○○ entered into a corporate credit transaction agreement with ○○ Bank on September 20, 2010 and entered into between ○○ Bank and ○○ Bank to receive loans of KRW 2.1 billion in total. On February 26, 2013, ○○ Bank added the Plaintiff to the said corporate credit transaction agreement by reflecting that ○○ and the Plaintiff were corrected as a joint place of business.

4. Determination

(a) The purchase price for the land: 20 million won; and

(1) On October 27, 2009, the Plaintiff filed a lawsuit against the above 1.1 billion won on the loan of 1.1 billion won with the above ○○○○○○○○○○○○○○, and entered into a contract to purchase the above 1.1 billion won from ○○○○○○○○○○○○○○○○, and paid the loan to ○○○○○○, as part of the purchase price. On December 29, 2009, the Plaintiff received KRW 210 million from ○○○○○○○○○○, and paid the loan to the above ○○○○○○○○○○. The Plaintiff asserted that the above 1 billion won was the remainder of the purchase price for the loan of 1.0 billion won on the loan of 1.3 billion won on the loan of 1 billion won from 1.3 billion won on September 13, 201, and that the Plaintiff was not the Plaintiff’s donation of 1.1 billion won on the loan of this case.

(3) In full view of the above circumstances, it is recognized that the Plaintiff donated KRW 210 million to Kim○○ on December 29, 2009. Therefore, the part of gift tax amounting to KRW 37,494,600 on the ground that the Plaintiff was donated KRW 210 million from Kim○○, among the instant disposition, on the ground that the Plaintiff was lawful.

(4) As to this, the Plaintiff asserts that, since Kim○-○ donated 200 million won to the Dong of the Plaintiff and Kim○-○, the Plaintiff was donated 63 million won equivalent to 30% of the Plaintiff’s share in KRW 210 million to the Plaintiff and Kim○-○, the Plaintiff was a donation from Kim○-○. As alleged by the Plaintiff, if the Plaintiff and Kim○-○ were to engage in a joint business by mutual investment, the Plaintiff and Kim○-○ was engaged in a joint business. In such a case, the Plaintiff may increase the Plaintiff’s share by making a contribution from Kim○-○, but it is difficult to understand that Kim○-○ made a donation to the joint business itself, the Plaintiff’s above assertion is without merit.

(b) Loaning KRW 980 million;

(1) On October 27, 2009, the Plaintiff entered into a contract to purchase KRW 1190 million for the instant land with Kim○○, and Kim○○ upon the registration of the establishment of the right to collateral security, upon which Kim○○ made a debtor with respect to the instant land, the Plaintiff borrowed KRW 980 million from ○○ Agricultural Cooperative and paid the loan to ○○○○○ as part of the said purchase price. On September 17, 2010, ○○ Agricultural Cooperative cancelled the registration of the creation of the right to collateral security, and ○○○○ borrowed KRW 2.1 billion from ○○ Bank on September 20, 2010 and repaid the Plaintiff’s loan amounting to KRW 980 million for the above loan to ○○○ Agricultural Cooperative as part of the said loan.

Article 2(3) of the Inheritance Tax and Gift Tax Act (amended by Act No. 111, Jan. 1, 2011) which was in force on September 1, 2010 provides that "donation" means a tangible and intangible property free of charge (including where it is transferred at a remarkably low price) shall be transferred to another person in a direct or indirect manner, regardless of its name, form, purpose, etc. It means an increase in the property value of another person by either A or contribution. Article 36 of the same Act provides that, where a creditor is exempted from an obligation or a third party is given the acceptance or reimbursement of an obligation, an amount equivalent to the benefit arising from such exemption, acquisition or reimbursement (where compensation has been paid, the amount of compensation shall be the value of donated property), and that 200,000,000 won shall be extended to 30,000,000 won, and that 20,000,000 won, 300,000 won, 209,000,0 won,000.

Therefore, the Plaintiff is in the position of property to secure another’s property in the lending of 2.1 billion won from the ○○○ Bank. Thus, even if Kim○○ paid 980 million won to the Plaintiff’s lending obligation to the ○○○○ Agricultural Cooperative, the Plaintiff cannot be deemed to have received 98 million won from the ○○○ Bank without compensation, even though the ○○○○ repaid 2.1 billion won to the Plaintiff’s lending obligation to the ○○○

On September 17, 2009, Kim○○○, selling the instant land to the Plaintiff, completed the registration of creation of the right to collateral security worth KRW 1.27 billion with the maximum debt amount of KRW 1.7 billion with the Plaintiff’s debtor in the future of ○○ Nonghyup, upon the creation of the right to collateral security, the Plaintiff borrowed KRW 98 million with ○○ Agricultural Co., Ltd. on September 17, 2010. After cancelling the registration of creation of the right to collateral security on September 20, 2010, the Plaintiff completed the registration of creation of the right to collateral security worth KRW 2.73 billion with the maximum debt amount of KRW 2.7 billion with respect to the instant land in the future of ○○ Bank on September 20, 2010, and ○○○ borrowed 2.1 billion with the establishment of the right to collateral security.

Therefore, even if Kim ○○ borrowed 2.1 billion won from ○○ Bank repaid the Plaintiff’s loan obligation of KRW 980 million to ○○○○○○○○○○○ Bank, the Plaintiff had completed the registration of creation of a collateral security with the maximum debt amount of KRW 1.277 billion in the previous maximum debt amount of KRW 1.4 million in the name of himself/herself, and the registration of creation of a collateral security with the maximum debt amount of KRW 2.733 billion in the future of ○○ Bank was completed, and it cannot be said that the value of the instant land has increased due to the repayment by ○○○○○.

On December 29, 2009, the Plaintiff recommended KimA to make an investment in the instant land, and completed the registration of creation of a collateral worth of KRW 800 million with respect to the instant land from November 2009 to April 201, 2010. Accordingly, KimA invested KRW 800 million in the Plaintiff. The name of the owner of the instant apartment was changed from Kim○ to the Plaintiff on December 9, 2009, and the name of the owner of the instant apartment was changed from the Plaintiff to Kim○○○ on May 14, 2009, and on March 30, 2010, the Plaintiff and Kim○○○○ was also a joint company of KRW 200,000,000,000 to ○○○○○○○, a joint company of KRW 500,000,000,000,000,000 from the Plaintiff’s loans to the instant apartment on March 30, 2010.

According to the above circumstances, when the plaintiff and Kim ○-○ newly constructed the instant franchise on the instant land in mutual cooperation, it appears that Kim○-○ was used to repay the debt that 2.1 billion won financed by the ○○ bank in the course of purchasing the instant land and raising funds necessary for the instant franchise construction, while the instant land owned by the plaintiff was offered as collateral for the above 2.1 billion won loan, and thus, it is difficult to view that Kim○-○ unilaterally transfers its property interest to the plaintiff.

(4) If so, even if ○○ obtained a loan of 2.1 billion won from ○○ Bank and repaid the Plaintiff’s debt of 980 million won to ○○○ Nonghyup as part of the loan, ○○○ cannot be deemed to have given such a donation to the Plaintiff, and there is no other evidence to acknowledge this otherwise.

Therefore, among the disposition of this case, the part of KRW 344,544,317, on the ground that the Plaintiff received donation of KRW 980 million from Kim○○○, shall be deemed unlawful.

C. Revocation of the instant disposition

According to the above, among the disposition of this case imposing KRW 382,038,917 on the Plaintiff the sum of the gift taxes, the part of KRW 37,494,600 on the ground that the Plaintiff was donated KRW 200 million from Kim○○○ was lawful, and the part of KRW 344,544,317 on the ground that the Plaintiff was donated KRW 98,000,000 from Kim○○○, was unlawful.

Therefore, among the dispositions of this case, the part exceeding 37,494,600 won should be revoked as above.

5. Conclusion

Thus, the plaintiff's claim seeking the revocation of the part exceeding 3.3 million won of the disposition of this case is justified within the above recognition scope, and the claim for payment is dismissed as it is without merit. It is so decided as per Disposition by the court of first instance according to the expansion of the purport of the claim in the trial.