Cho Jae-2017-west-2681 ( November 01, 2017)

The taxation disposition that denies the transfer of real estate between lineal ascendants and descendants and presumed gift is legitimate.

The grounds for exclusion of presumption under each subparagraph of Article 44(3) of the former Inheritance Tax and Gift Tax Act shall be proved by the plaintiff, and the economic rationality ordinarily takes place between the general trading parties who do not have any relationship with him/her is an important basis for determining the grounds for exclusion of presumption of gift.

Article 44 of the former Inheritance Tax and Gift Tax Act (Presumption of Donation of Property Transferred to Spouse, etc.); Article 33 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act

2018Guhap52747 Revocation of Disposition of Imposition of Gift Tax

Aa and 1 other

CC director of the tax office

July 11, 2019

September 17, 2019

1. The part of the disposition imposing gift tax of KRW 0,000,000 (including additional tax) on the Plaintiff on April 4, 2017, which exceeds KRW 0,000,000 (including additional tax) among the disposition imposing gift tax of KRW 0,000,000 (including additional tax) shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. 9/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

The Defendant’s disposition of imposing gift tax of KRW 0,000,000 (including additional tax) on the Plaintiff on April 4, 2017 shall be revoked.

1. Details of the disposition;

(a) BB is the Plaintiff’s father and the network CC (hereinafter referred to as “the network”) is the Plaintiff’s mother, and Dd, e, e,ff, and g are the brothers and sisters of the Plaintiff (hereinafter referred to as “Plaintiffs, Bb, D, e, e,ff, and g together with Plaintiff, Bb, d, e, e, f, and g).

B. On December 6, 2012, the Deceased died, and the instant inheritor made a divided consultation on inherited property on June 25, 2013.

C. On July 1, 2013, the Plaintiff completed the registration of ownership transfer as to shares of 89/100 of the instant land due to inheritance by consultation and division, and BB as to shares of 11/100 of the instant land and shares of 1/2 of the instant building.

D. On August 28, 2014, BB transferred 11/100 of the instant land and the instant building (hereinafter collectively referred to as “the instant real estate”) to the Plaintiff, and thereafter reported and paid KRW 000,000,000, acquisition value of KRW 0,000,000, to the Plaintiff.

E. After conducting an investigation of capital gains tax on BB, the Defendant determined and notified that: (a) transactions related to the instant real estate are between lineal ascendants and descendants; and (b) transactions related to the instant real estate are deemed to have been made by BB pursuant to Article 44(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter “former Inheritance Tax and Gift Tax Act”); and (b) KRW 0,000,000,000, which was paid to BB and used by the Plaintiff for payment of capital gains tax, was donated to the Plaintiff on April 4, 2017; and (c) the Plaintiff determined and notified the gift tax of KRW 0,00,000,000 (including penalty tax) as donated property on April 4, 2017 (hereinafter “former disposition”).

F. On May 2, 2017, the Plaintiff dissatisfied with the previous disposition of this case and filed an appeal with the Tax Tribunal on May 2, 2017, and on November 1, 2017, the Tax Tribunal rendered a decision that the Defendant re-informs the amount of debt taken over from BB as of August 28, 2014, and confirmed the amount of the obligation, and corrected the tax base and tax amount to be deducted from the value of donated property, and dismissed the Plaintiff’s remaining claims.

G. Accordingly, on December 29, 2017, the Defendant calculated the amount of KRW 00,000,000,000, which the Plaintiff acquired from BB as of August 28, 2014, as of August 28, 2014, as the value of donated property, after subtracting the amount of KRW 0,00,000,000 from the amount of the previous disposition from the value of donated property, and issued a correction and notice of the amount of the gift tax of the instant case as at KRW 0,00,00 (including additional taxes) (hereinafter “the remainder of the previous disposition in this case”).

2. Whether the disposition is lawful;

A. The plaintiff's assertion

For the following reasons, the transfer of the instant real estate by BB to the Plaintiff is presumed to have been donated under Article 44(1) of the former Inheritance Tax and Gift Tax Act, and thus, it cannot be deemed as the value of donated property, and thus, the instant disposition on a different premise is unlawful.

1) The Plaintiff actually paid 0,00,000,000 won in return for the transfer of the instant real estate to bB. The details of the payment of the purchase price are as shown in the table.

2) In the agreement on the division of inherited property among the instant inheritors, the Plaintiff, the president of the instant heir, inherited half of the deceased’s property according to the maintenance of the deceased, and succeeded to the remainder by other inheritors. As a result, the remaining inheritors except the Plaintiff and BB have succeeded to financial assets, not real estate, for reasons such as overseas residence, etc., and the Plaintiff and BB inherited one-half shares of the instant land and the instant building, and then bbB paid inheritance tax as a joint obligor for inheritance tax, and made an agreement to pay the shortage to the Plaintiff.

3) Since then, while bB paid inheritance tax in annual installments, there was an additional amount of inheritance tax according to the Defendant’s inheritance tax investigation. To pay the inheritance tax by annual installments, the instant real estate owned by bB was refused to apply for additional loans from financial institutions as collateral, but the instant real estate was transferred to bB to pay the additional amount of inheritance tax with a secured loan granted under the Plaintiff’s name. In fact, the Plaintiff received a secured loan on the instant real estate and paid it to bB as sales amount, and bB paid it as inheritance tax.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

1) The total amount of inheritance tax calculated on the instant inheritors is indicated in the table.

2) BB and the Plaintiff’s payment details of inheritance tax are as indicated in the list.

D. Determination

1) Determination on the transfer of the instant real estate

A) Article 44(1) of the former Inheritance Tax and Gift Tax Act provides that "where the transferor transfers the property to his/her spouse, or lineal ascendants or descendants (hereafter in this Article, referred to as the "spouse, etc."), the value of the property shall be presumed to have been donated to his/her spouse, etc. and the value of the property shall not be deemed to have been donated to him/her." Article 44(3) provides that "where the pertinent property falls under any of the following subparagraphs, and it is clearly recognized that the transfer has been made to his/her spouse, etc. at the price, etc., and where it is prescribed by Presidential Decree," Article 33(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 26960, Feb. 5, 2016; hereinafter referred to as the "former Enforcement Decree of the Inheritance Tax and Gift Tax Act") provides that "where the property is proved to have been disposed of at the price of the relevant property," under subparagraph 2 of Article 444(3).

B) In light of the following circumstances, it is insufficient to recognize that the Plaintiff’s evidence alone submitted by the Plaintiff reverses the presumption of gift under Article 44(1) of the former Inheritance Tax and Gift Tax Act and that bbb transferred the instant real estate with payment from the Plaintiff. Thus, this part of the Plaintiff’s assertion is without merit.

① As seen earlier, Article 44(1) of the former Inheritance Tax and Gift Tax Act provides that the value of the property transferred to a lineal ascendant or descendant shall be presumed to have been donated to the transferee. As such, the instant real estate transferred to the Plaintiff, bB, is presumed to be donated property. The Plaintiff should assert and prove the grounds for exclusion from presumption under each subparagraph of Article 44(3) of the former Inheritance Tax and Gift Tax Act. In addition, the Inheritance Tax and Gift Tax Act’s provision on presumption of gift regarding the property transferred to the spouse or a lineal ascendant or descendant is intended to prevent the act of concealment of gift between the most beneficial relationship, and the parties closely related to one another may voluntarily create external transaction terms under the common interest of avoidance of tax burden. As such, in determining whether the relevant transfer constitutes a ground for exclusion from gift, it would be an important standard to determine whether there is an economic rationality ordinarily made between the general parties without relationship.

② A real estate sales contract prepared in relation to the transfer of real estate of this case states that the purchase price is KRW 0 billion, which is the standard market price, and both the down payment, intermediate payment, and remainder payment are stated on June 30, 2014, but this is highly different from the time of payment for the purchase price alleged by the Plaintiff, so it is proved that the Plaintiff already paid the price due to the amount of income, etc. already taxed or reported to acquire the real estate of this case under the real estate sales contract (see Article 33(3)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act), or where it is proved that the payment for the price was made by disposing of the property of this case for the acquisition of the real estate (see Article 33(3)3 of the former Enforcement Decree of the Inheritance Tax

③ In particular, most of the money that the Plaintiff paid for the transfer of the instant real estate was used in inheritance tax payment. bbb paid KRW 0 billion of inheritance tax out of inherited property, and the remainder of hhh’s testimony, consistent with the Plaintiff’s assertion that the Plaintiff made an oral agreement to pay the Plaintiff, is difficult to believe that the Plaintiff’s testimony on the instant real estate, which is consistent with the Plaintiff’s assertion, is difficult to acknowledge as part of the purchase price, is difficult. Rather, bbb paid KRW 0 billion of inheritance tax and its difference is considerably reasonable; bbb paid KRW 0 billion of inheritance tax; bbb paid for the instant real estate beyond the scope of the obligation to pay inheritance tax and paid for the inheritance tax on behalf of the Plaintiff or other inheritors; and in light of the Plaintiff’s assertion that as long as the money is included in the purchase price claimed by the Plaintiff, it is difficult to recognize that the Plaintiff paid for the transfer of the instant real estate as part of the purchase price. In particular, the portion of the Plaintiff’s assertion that the Plaintiff paid to the heir is more difficult.

2) Determination on the value of donated property

On the other hand, the defendant calculated the original value of donated property from KRW 000,000 to KRW 200,000,000,000,000,000 which was used by the plaintiff to pay the transfer income tax after paying to bB, and was disposed of by subtracting KRW 00,000,000 from the value of donated property according to the re-audit decision by the Tax Tribunal. However, in light of the following circumstances recognized in light of the overall purport of the above facts and arguments, where there is a real estate in this case and there is a debt amount of bB, which is not the plaintiff, the plaintiff would be liable for the debt due to the acquisition of the real estate in the status of the surety. ② The debt amount of bB as of the date of the transfer of the real estate in this case is difficult to view that the transfer of the amount was made due to the transfer of the real estate in this case, and thus, it is reasonable to exclude the above debt amount of bB from the value of donated property in this case.

b With respect to the amount of debt of bB, according to the facts of such recognition and the purport of the entire pleadings:

① From the first real estate of this case, 00 billion won and the rental deposit of 00 million won with respect to the real estate of this case, 200 billion won and 00 billion won, 200,000,000 won (1/2 of the building of this case) are the first real estate of this case, 422%, and 91.578% of the portion equivalent to the deceased's shares (1/2 of the land of this case and the building of this case) among the real estate of this case, 400,000 won and 00,000 won are the real estate of this case, 20,000 won are the real estate of this case, 20,000 won are the real estate of this case, 20,000,000 won are the real property of this case, 20,000,000 won are the real property of this case, 20,000,000 won are the real property of this case.

3. Conclusion

Therefore, the plaintiff's claim is justified within the above scope of recognition, and the remaining claims are dismissed as it is without merit. It is so decided as per Disposition.