Appropriateness of presumption of inheritance on disposed property, such as deposit withdrawal prior to the commencement of the inheritance

When the tax authority proves that the disposal property of a decedent before the commencement date of inheritance is objectively unclear, it may be included in the taxable value of inherited property unless the taxpayer proves the use thereof.

Article 15 of the Inheritance Tax and Gift Tax Act (Presumption of Inheritance of Property Disposed)

1. All of the plaintiffs' claims are dismissed.

2. The costs of litigation shall be borne by the plaintiffs.

The Defendant’s imposition of each inheritance tax of KRW 218,522,520 on May 3, 2004 against the Plaintiff Lee ○○, KRW 27,058,634 on the Plaintiff Gangwon-○, and KRW 14,348,096 on the Plaintiff Gangwon-○, shall be revoked.

1. Details of the disposition;

The following facts may be acknowledged either in dispute between the parties or in combination with the whole purport of the pleadings in each entry of evidence A, 15, 16, and 1-1 through 4, 2-1, 2, 3 through 8, or in each entry of evidence A, 15, 16, and 1-2:

A. The Plaintiffs reported the value of inherited property to the Defendant at KRW 3,301,962,762 (the taxable value of inherited property: KRW 2,598,113,482) on Nov. 12, 2002, and paid KRW 205,369,950 in total, as inheritance tax.

B. On May 3, 2004, the Defendant on the spot investigation of the Plaintiffs’ inherited property, confirmed the following facts, and applied the relevant Acts and subordinate statutes as stated above, presumed that the Plaintiffs inherited the aggregate of KRW 1,072,266,020 in addition to the reported inherited property as well as the inherited property, and decided to additionally pay KRW 218,52,520,520, and KRW 27,058,634 to the Plaintiff ○○○, and KRW 14,348,096 to the Plaintiff ○○ (hereinafter “instant disposition”).

(1) The sum of the amounts withdrawn from the deceased’s deposit account is KRW 5,973,69,00 for a period not exceeding two years before the deceased’s commencing date of inheritance, and the sum of the amounts deposited into the deceased’s deposit account is KRW 5,812,486,00.

(2) Of KRW 5,812,486,00, KRW 3,190,941,00, out of KRW 5,812,486,00, which was deposited in the deceased’s deposit account, was created separately regardless of the amount of KRW 5,973,69,00, which was withdrawn from the deceased’s deposit account, for a period not exceeding two years before the deceased’s commencement date of inheritance. Accordingly, only KRW 2,621,545,00, excluding the above KRW 5,812,486,941,00, which was deposited in the deceased’s deposit account for a period not exceeding two years before the deceased’s commencement date of inheritance, was withdrawn again from the deceased’s deposit account for a period not exceeding two years.

(3) Of the above 5,973,69,00 won, the remaining amount of KRW 3,352,154,000, excluding the above 2,621,54,000 won, which was withdrawn from the deceased’s deposit account for a period of not more than 2 years before the deceased’s commencing date of commencing the inheritance (=5,973,69,000 won-2,621,545,000 won) which was clearly identified as the place of use and it is objectively obvious that the use was objectively apparent (hereinafter “the withdrawn amount”). The remaining amount of KRW 2,279,88,000, which was not identified as the account of the deceased’s account (whether the account was transferred and the account was not confirmed, the account holder’s account was different from the account and account number of the customer, or the obligation was not known as a non-business entity) is presumed to be 1,266,206,308,2005 won.

C. On June 30, 2004, the plaintiffs appealed against the disposition of this case and filed a request for a national tax trial with the National Tax Tribunal, but they dismissed the said request on February 9, 2006 by the National Tax Tribunal.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

(1) It is unlawful for the Defendant to determine the amount not included in the total amount of the total amount of the deposits without any evidence in calculating the actual amount of the deposits within two years before the deceased’s commencing date of commencing the inheritance, i.e., the amount separately created, solely based on KRW 3,190,941,000, without any evidence.

(2) The presumed inherited property of this case is withdrawn from the deceased’s account and transferred to the account of the deceased’s transaction partner (the original transaction partner who was the main business of the deceased and the construction business operator related to the construction of a new building located in Ansan-gu, Ansan-si). The purpose of the property cannot be “amount objectively unclear.” Thus, it shall not be presumed as inherited property and shall not be included in the taxable value of inherited property.

(3) The estimated inherited property of this case was used as KRW 240,00,000, including living expenses and medical expenses, etc. for a period not exceeding two years before the deceased’s commencing date of commencing the inheritance, and as loans, KRW 158,00,000, and interest on KRW 68,000,000, and operating expenses of the deceased’s workplace (charges, rent, material expenses, etc.).

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Determination as to the plaintiffs' above (1) proposal

According to the evidence adopted in the above 1. The above 5,812,486,00 won out of the above 5,190,941,00 won out of the deceased's deposit account for a period of not more than two years before the deceased's commencement date of inheritance can be acknowledged as being created separately regardless of the above 5,973,69,00 won out of the deceased's deposit account. The plaintiffs' assertion on this part cannot be accepted.

(2) Determination as to the plaintiffs' above (2) proposal

(A) Article 15(1)1 of the Inheritance Tax and Gift Tax Act and Article 11(1) and (2) of the Enforcement Decree thereof, where an ancestor disposes of inherited property prior to the commencement date of inheritance, may seek unfair mitigation of inheritance by donation or inheritance to an heir in cash, whose taxation data are not easy to be exposed, so the burden of proof may be substantially converted to prevent this, and where the tax authority proves that there is an objectively unclear amount, it may be included in the taxable value of inherited property unless the taxpayer proves that the purpose of the disposal is objectively unclear (see Supreme Court Decision 98Du3075, Dec. 8, 1998). Furthermore, even if the disposal price of inherited property has been deposited, delivered, or contributed to a third party, if the existence of debt to the third party or the cause of contribution to property has not been specifically verified, the use of the money is objectively obvious (see Supreme Court Decision 98Du4993, Sept. 3, 199).

(B) As to the instant case, it is insufficient to recognize that the estimated inherited property of this case was transferred from the deceased’s account to the account of the deceased’s business partner (the original business partner who was the deceased’s main business and the construction business operator related to the construction of a new building in Ansan-dong, Ansan-si), and there is no other evidence to acknowledge this otherwise, and therefore, the presumption of inherited property of this case is an amount objectively unclear, and thus, it is not acceptable to accept this part of the plaintiffs’ assertion. It is not acceptable to accept this part of the plaintiffs’ assertion.

(3) Judgment on the plaintiffs' assertion of the above (3)

The statements on Gap 1 through 11, 14, and 17 through 19 alone are insufficient to recognize that the presumed inherited property of this case was used for 240,000,000 won including living expenses and medical expenses, etc. for a period not exceeding two years before the date on which the deceased commenced the inheritance, 158,000,000 won for the repayment of loans of the deceased, and interest on loans, 68,000,000 won for the amount of redemption of loans of the deceased, and expenses for the operation of the deceased's place of business (such as wages, rent, expenses for materials, etc.). The plaintiffs' assertion on this part cannot be accepted,

(4) The theory of lawsuit

Therefore, the instant disposition that determined and imposed the amount of inheritance tax by including the estimated inherited property in the taxable value of inherited property is lawful.

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed in entirety as it is without merit, and it is so decided as per Disposition.

Related Acts and subordinate statutes

○ Inheritance Tax and Gift Tax Act

Article 15 (Presumption of Inheritance of Disposal Property, etc. before Commencement of Inheritance)

(1) In case where an inheritee disposes of the inheritee’s properties or bears obligations, and where it falls under one of the following subparagraphs, it shall be presumed to have inherited property and shall be included in the taxable amount of inheritance taxes under the provisions of

1. Where the amount obtained by disposing of the property of an ancestor or withdrawn from the property of the ancestor is not less than 200 million won by the type of property within one year before the date inheritance commences, and where the use is not less than 500 million won by the type of property within two years before the date inheritance commences, and

(3) The calculation of the amount, etc. received or withdrawn from the property under paragraph (1) 1 by disposal of the property and the classification by kind of property shall be prescribed by Presidential Decree

○ Enforcement Decree of Inheritance Tax and Gift Tax Act

○ Scope of property or obligations included in the taxable amount of inheritance taxes of Article 11

(1) In the application of the provisions of Article 15 (1) 1 of the Act, the disposal amount and the withdrawn amount of property shall be the sum of the amounts calculated according to the classification in each of the following subparagraphs:

2. Where the decedent has withdrawn money, etc. (hereafter in this Article, referred to as “money, etc.”) from the inherited property, the money, etc. actually withdrawn within one or two years prior to the date on which the inheritance commences. In this case, where the relevant money, etc. has been deposited through the passbook or the truster’s account, etc. as prescribed by the Ordinance of the Ministry of Finance and Economy, it shall be such money, etc. as calculated by deducting the aggregate of money, etc. deposited during the relevant period from the aggregate of such money, etc. withdrawn within one or two years prior to the date on

(2) The term “where the use is not objectively obvious as prescribed by the Presidential Decree” in Article 15 (1) 1 and 2 of the Act means a case falling under any of the following subparagraphs:

1. Where the other party to a transaction who has paid the amount received by an ancestor by disposing of the property or the money, etc. withdrawn from the property of the ancestor or the amount borne by the ancestor, and the other party to the transaction who has paid the received money (hereafter in this Article, referred to

2. Where the fact of receiving money, etc. is not denied by the opposite contractual party, or the fact of receiving money, etc. is not recognized in light of financial status

3. Where a person who has a special relationship with an inheritee under Article 26 (4) is not recognized by social norms;

4. Where other assets acquired by the predecessor with money, etc. received by him/her are not verified;

5. Where disbursement is not recognized in light of the age, occupation, career, income, property status, etc. of the inheritee;

(5) For the purpose of Article 15 (1) 1 of the Act, the term “property by category” means:

1. Cash, deposits, and securities;

Finally.