In order to presume a gift, the tax authority must prove that the donor has the financial capacity to donate property to the donor.

In order to presume a gift, the tax authorities must prove that the donor has re-refluences to donate property to the donor, in addition to the absence of certain occupation or income for the donee.

Article 45 of the former Inheritance Tax and Gift Tax Act: Presumption of Donation of Property Acquisition Funds

2016Guhap622222 The revocation of revocation of disposition imposing gift tax

00AA

○ Head of tax office

2016.09.06

October 18, 2016

1. On June 5, 2013, the Defendant’s disposition of imposing gift tax on the Plaintiff on November 26, 2014, the imposition of 00 won of gift tax on June 14, 2013, KRW 00 of gift tax on June 14, 2013, KRW 00 of gift tax on June 20, 2013, KRW 00 of gift tax on July 11, 2013, KRW 00 of gift tax on August 30, 2013, KRW 00 of gift tax on August 30, 2013, KRW 00 of gift tax on August 30, 2013, and KRW 00 of gift tax on September 2, 2013, respectively is revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On May 2013, the Plaintiff purchased 362,079,600 won in total and held 55% of the total issued and outstanding shares of WW from the largest KK and KimP (hereinafter “W”).

나. WWW은 승마장 사업을 추진하면서 승마장 부지로 사용하기 위하여 2012. 12. 27. 홍GG으로부터 YY시 RR면 QQ리 *8-3 외 8필지를 1,380,000,000원에 매수하였는데, 원고는 2013. 6. 5. 그 매매대금 잔금인 104,000,000원 중 원고의 주식 보유지분 비율에 해당하는 57,200,000원(이하 '이 사건 매수대금'이라 한다)을 원고의 은행계좌에서 직접 매도인 홍GG에게 송금하였다.

C. With respect to the construction of riding courses promoted by WW, W or the Plaintiff paid the construction cost of KRW 263,501,000 in total in accordance with the Plaintiff’s share holding ratio as shown in Table 1 below to BB Co., Ltd. (hereinafter “this case’s construction cost”).

D. The Defendant appears to have purchased WW stocks purchased by the Plaintiff with the pre-tax fund held by the Plaintiff. However, the purchase price in this case and the construction price in this case, for which the source of payment is unclear, are presumed to have been donated by the State KK (the Plaintiff shall complete the marriage report with the State KK on May 2, 2014) in a de facto marital relationship at the time pursuant to Article 45(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”). On November 26, 2014, the Defendant presumed that the Plaintiff was donated by the State KK (the Plaintiff shall complete the marriage report with the State KK on November 26, 2014).

E. Accordingly, on July 23, 2015, the Plaintiff filed a petition with the Tax Tribunal for a trial seeking the revocation of the instant disposition, but a decision to dismiss the Plaintiff’s claim was rendered on December 28, 2015 by the Tax Tribunal.

Facts without any dispute arising in recognition, Gap's 1, 2, Eul's 2, 4, 14 (including all family cards with a serial number), and the purport of the whole pleadings.

2. Summary of the parties' arguments;

A. The plaintiff's assertion

For a long time, the Plaintiff purchased WW’s shares with the said money and the money on a deposit basis, and paid the instant purchase price and the instant construction cost. In order to be lawful for the instant disposition, it should be proven that the Defendant had re-refluences to donate the property to the State KK identified as the donor. However, at the time of the payment of the instant purchase price and the instant construction cost, KK had no particular property, and it is not recognized that the Plaintiff had re-refluent ability to donate the said amount to the Plaintiff on the ground that it had a liability of KRW 100 million with a failure to invest in futures. Accordingly, the instant disposition did not meet the taxation requirements under Article 45(1) of the former Inheritance Tax and Gift Tax Act, and was unlawful.

B. Defendant’s assertion

1) The Plaintiff’s source of the instant funds is unclear, such as failure to present at all details of the instant purchase price and the instant funds held at the time of the payment of the construction cost, or the materials such as financing cost. On the other hand, in the course of the tax investigation, the Plaintiff stated that the new M that is responsible for the construction of the horse riding track promoted by WW and that 5% of the shares in WW are actually borne by the State KR. ② YV and UN stated that the TRN, who is an employee of the said JV and its employees, stated that the JV and its employees were owned and operated by the State KR, and ③ the Plaintiff also paid the instant purchase price and the instant construction cost as the money of the State KR in the vindication submitted to the Seoul regional tax office around May 2014. Therefore, it should be deemed that KR had a considerable ability at the time of the tax investigation.

2) Even if not, the Plaintiff’s instant disposition is lawful in accordance with Article 2 of the Inheritance Tax and Gift Tax Act, since the Plaintiff is deemed to have received the instant purchase price and the instant construction price directly from the Jeju K, comprehensively taking account of the foregoing circumstances.

3. Relevant statutes;

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

4. Determination

A. Article 45(1) of the former Inheritance Tax and Gift Tax Act provides that, in cases where it is difficult to recognize that a person having no occupation or income has acquired the property by his/her own means when considering the occupation, age, income, property condition, etc., as prescribed by Presidential Decree, the funds for acquiring the property shall be presumed to have been donated to the person who acquired the property at the time of the acquisition of the property, and shall be deemed to have been donated to the person who acquired the property. In principle, since the fact of donation of the property, which is a requirement to impose the gift tax, is proved by the tax authority, it is reasonable that the portion of the funds for acquiring the property cannot be deemed to have been donated to another person, barring any special circumstance, even if the funds required for acquiring the property are not provided to the person having no occupation or income, and it is reasonable to presume that a lineal ascendant or spouse, etc. has received the funds for acquiring the property from the person who acquired the property by his/her own means, and in order to presume such donation, it shall be proved to have no income from the donee or gift (see Supreme Court Decision 20008Do1484.294.

B. In full view of the purport of the entire pleadings, the following facts may be acknowledged in each entry of evidence Nos. 1, 5, 8, and 10:

1) Upon entering into a futures trading consignment agreement with E Futures Company on May 19, 2005, the Note KR incurred a loss of KRW 260,370,000 through won and futures trading on 27 occasions from May 24, 2005 to August 10, 2005. While the futures trading was resumed on July 3, 2008, the Note KS continued to engage in the futures trading on October 10, 2008, it additionally incurred KRW 6,232,581,000 from KRW 4,00,000,000 generated in the course of the futures trading to E Futures Company.

2) On May 3, 1994, KK established BB trade and operated it until March 20, 2009. As such, the company failed to pay corporate tax, it was liable to pay secondary tax as an oligopolistic shareholder of the company as the oligopolistic shareholder of the said company, and was in arrears with national tax of KRW 1,106,804,710 in total until April 30, 2014, including KRW 11,608,830 in global income tax for the year 2007.

3) Since 2010, NoteK had no particular wage and salary, and had been sold as voluntary auction on July 28, 201, Seoul***Gu*** Dong**** Dong*0-* also an apartment building of *01.

4) On December 28, 2012, the Plaintiff was in possession of the deposit for lease on a deposit basis with Seoul*Gu**1* 1* ○○ apartment 1* 6* Dong 60,000,000, and most of the above funds were collected in cash.

5) The vindication of May 14, 2014, submitted under the Plaintiff’s name at the time of the Seoul Regional Tax Office’s investigation into the arrears of the Jeju Regional Tax Office with respect to the Jeju KK, stated that the purchase price in this case and the construction cost in this case are borne by the State KK. Meanwhile, the NewM, the representative director of the company that was contracted for construction of the horse riding course promoted by W W and W, stated that the 55% of the shares in WW in the above investigation process, is in fact owned by the State K, and that the UNN and the yellowV, the employees of the J horse riding course, were in charge of the operation of the J horse riding course, and the horses belonging thereto are also known to the State K.

6) On May 4, 2014, the director of the Seoul Regional Tax Office: (a) regarded the Plaintiff as the Plaintiff and the Plaintiff as the Plaintiff’s 11-mam of the horse riding track run by the Plaintiff, and seized 10 mam of the horse that the Plaintiff had operated. As to the above seizure disposition, the Plaintiff filed a lawsuit seeking confirmation of invalidation against the above seizure disposition, and the Plaintiff and the Jeju KK jointly occupied the said horse, and thus, seizure under Article 190 of the Civil Execution Act is lawful and there is insufficient evidence to regard it as the Plaintiff’s unique property (Seoul Administrative Court Decision 2014Guhap64162, Dec. 4, 2015).

C. As seen in the above facts, it is difficult to readily conclude that, as seen earlier, the Plaintiff in a marital relationship and the Note KK were jointly involved in the operation of the JV, and there is no evidence to conclude that, at the time of the payment of the purchase price and the construction price of this case, there was no special property or revenue from the Note KK. Rather, the Seoul Regional Tax Office bears the obligation of a large amount of national tax and loan. It is difficult to readily conclude that, even if it was lawful pursuant to Article 190 of the Civil Execution Act to seize 10 ma at the time of the JV jointly possessed by the Plaintiff and the Note KK as a disposition of arrears against the Plaintiff, it is difficult to conclude that the Plaintiff, as well as the Plaintiff in a marital relationship, was able to jointly participate in the operation of the JVR. Accordingly, it is difficult to deem that the Plaintiff’s funds to purchase the purchase price and the construction price of this case were donated to the Plaintiff, and even if the Plaintiff did not have any specific evidence to deem that the Plaintiff’s funds were donated to the Plaintiff or the Plaintiff’s funds.

As such, insofar as there is no evidence to deem that the Plaintiff had the financial capacity to donate the instant purchase price and the instant construction price to the Jeju K, it cannot be presumed that the Plaintiff received the said payment from the Jeju K pursuant to Article 45(1) of the former Inheritance Tax and Gift Tax Act.

D. Furthermore, in relation to the issue of whether the State KK donated the purchase price of this case and the construction price of this case to the Plaintiff, as acknowledged earlier, there was no particular property or income from the State KK, and the State KK did not submit objective financial data to deem that it remitted the purchase price of this case and the construction price of this case to the Plaintiff, or that it paid it directly to the contracting party. In the course of the tax investigation with respect to the State KK, there was no explanation (Evidence No. 5) submitted in the name of the Plaintiff in the course of the tax investigation with respect to the State K, and there was no explanation in the statement submitted in the name of the Plaintiff that it paid the purchase price of this case and the construction price of this case. Therefore, it is insufficient to recognize that the State K donated the purchase price of this case to the Plaintiff in the course of the tax investigation with respect to the State K, and there

E. Therefore, the instant disposition should be revoked as it is unlawful because it does not meet the taxation requirements.

5. Conclusion

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