Seoul Administrative Court 2010Gudan23913 ( December 28, 2011)

Seocho 2010west 1631 (2010.08.02)

Since the termination of the contract of gift is recognized, the disposition of the witness as the transferor is unlawful.

The disposition to consider a witness as a transferor is unlawful, inasmuch as there is no evidence to prove that the rest of the transfer price belongs to a witness, the fact that a contract of donation was cancelled and the name of the donor was restored to the original donor and the donor was to be registered with the assignee, and the donor was to be the transferor.

Article 101 of the Income Tax Act

2011Nu36700 Revocation of disposition of imposing capital gains tax

Republic of Korea, Japan and one other

Head of the Do Tax Office

Seoul Administrative Court Decision 2010Gudan23913 decided September 28, 2011

April 6, 2012

May 11, 2012

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition disposition of capital gains tax of KRW 000 per each of the Plaintiffs on March 16, 2010 is revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of disposition;

The reasoning of this decision is as stated in Paragraph (1) of the reasoning of the judgment of the court of first instance, and thus, it is accepted by Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiffs' assertion

A) After cancelling the gift contract on the forest of this case and transferring the contract to the preceding B. The transfer price of the instant forest was KRW 000, 000, and used as the loan repayment (00,000, 000) to LA to LA for LA for LAC, for LAC’s loan payment (0,000,000,000,000,000,000) for LAC, and for funeral procedures. Accordingly, the instant disposition based on the premise that the Plaintiffs are the transferor is unlawful since the forest of this case is the transferor.

B) Even if the Plaintiffs were to be the transferor of the instant forest, the value of the instant forest acquisition (donation) should include KRW 000 of the maximum debt amount with respect to the mortgaged mortgage set forth in the instant forest land.

C) Of the transfer proceeds, 000 won was used for the repayment of debt under the name of the AA, and was not reverted to the Plaintiffs, and thus, the above KRW 000 should be deducted from the transfer margin under the substance over

2) The defendant's assertion

In light of the fact that there is no relevant document, such as the contract for termination of the gift contract, it is difficult to find out whether the Plaintiffs and the Company agreed to cancel the gift contract of this case. The receipts for the sale price of the forest of this case contain the Plaintiffs as the seller; KRW 000 out of the sale price of the forest of this case was used for the repayment of the obligation of the Plaintiff’s loan; however, it cannot be deemed that the remainder of the loan repayment or nursing expenses was paid out of the above transfer price; the transfer date of assets under the Income Tax Act is, in principle, the date of settlement; the transfer date of assets under the Income Tax Act is the date of the transfer of the right or the transfer of the right; the date of settlement of the remainder of the forest of this case is the date of acquisition of donated property; and since the termination date of the gift contract of this case was restored to the Plaintiff on November 7, 2006, the fact that the Plaintiffs already transferred the forest of this case to B prior to the actual restoration of the title of the forest of this case without the Plaintiffs’ ownership.

B. Determination

1) The issue concerning who the transferor of the instant forest is the transferor of the forest

In order for the Defendant’s instant disposition that is premised on the premise that the transferor of the instant forest is the Plaintiffs, it shall be deemed that ① the revocation of the gift contract between the Company and the Plaintiffs and the registration of cancellation thereof made only the form for the purpose of less tax reduction without actual intent between the parties corresponding to that form, and thus, it shall not be deemed that the Plaintiff, who was the donor, directly transferred the instant forest by applying Article 101(2) of the Income Tax Act (amended by Act No. 8144, Dec. 306; hereinafter the same) by deeming the validity of the termination of the gift contract between the Company and the Plaintiffs as the transferor of the instant forest, or by applying Article 101(2) of the Income Tax Act (amended by Act No. 8144, Dec. 30, 2006; hereinafter the same).

2) Determination as to the issue ①

A) Facts of recognition

According to Gap evidence Nos. 1, 2, 3 and 4, evidence Nos. 18-8, 9, 10, 11, 12, Eul evidence No. 4 (including paper numbers), and witness No. 1B before the court of first instance, the following facts may be acknowledged:

(1) On September 29, 2006, the formerB concluded a sales contract for the forest of this case in consultation with the Plaintiff’s father and the Plaintiff’s father and the Plaintiff’s children. The contract location was only Park H and the Plaintiff did not leave the Plaintiff.

(2) The sales contract at the time entered into by the seller is Park H and the Plaintiffs (including the Plaintiff’s agent), and the seller’s special terms and conditions indicate that “the seller cancels any donation and registers it to A and transfers it to the buyer.” The seller revised the contract date on October 25, 2006.

(3) On October 25, 2006, the seller entered into a sales contract with respect to the forest of this case, where the seller entered into the contract in the name of the seller and the seller entered the contract in the name of the seller, and the seller entered into a sales contract with respect to the forest of this case.

(4) On the other hand, on December 28, 2005, the termination contract on October 27, 2006, which was concluded on October 27, 2006 between ASEAN, the Plaintiffs, and Park HH, to cancel by the agreement on donation of the forest of this case with the Plaintiffs, and Park HH.

(5) The formerB paid the remainder of KRW 132,50,000 on October 27, 2006 of the forest of this case. The remainder of the receipt is the seller’s entry of H and the Plaintiffs. Meanwhile, 000 out of the remainder was used to pay back the obligations owed to the Plaintiff for the loans owed to the ASEAN.

B) Determination

The following circumstances revealed through the aforementioned disposal process and the above facts are as follows: ① the Plaintiffs and HaB were related to the relationship between the Plaintiff and HaB at the time of the initial contract, with which the title of registration of the forest land of this case was Park HH, and the seller was entered into between HaB and HaH; ③ the Plaintiffs and Park HH and Park HH were to enter into a sales contract with the former BB and return the title of registration to NA without entering into a contract of donation; and also the sales contract was to enter into a sale contract with the former B as the seller. In light of such contents of the contract, the Plaintiffs and Park HB and HaB and HaB were to enter into a sale contract with the intent of NA as well as the Plaintiff’s intent to enter into a transfer agreement with the sale of the forest of this case, and thus, the Plaintiff’s and Park HA cannot be deemed as having entered into a new legal relationship with the transfer-based agreement to the extent that the transfer-based agreement and the transfer-based agreement were not effective.

Therefore, the above judgment is examined on the premise of the above judgment.

2) Judgment on key issues ②

Article 101 (2) of the Income Tax Act provides that "in case where any person, who has donated any assets to a person with a special relationship under paragraph (1) (excluding the case of a spouse being subject to Article 97 (4)) in order to reduce unreasonably the income tax on transfer income, donates such assets to another person within five years from the date of donation, the donor shall be deemed to have transferred the assets directly by him. In this case, the donated assets shall not be subject to the gift tax, notwithstanding the provisions of the Inheritance Tax

The above provision is intended to deny the transfer of gift through the form of gift in order to avoid capital gains tax and to impose capital gains tax on the donor who is the actual income. Thus, even if the sum of the gift tax and capital gains tax on the donee is less than the capital gains tax on the direct transfer of the donor, it does not constitute a case where capital gains tax is reduced unreasonably immediately on the ground of such external reasons, and it requires that capital gains tax should be actually reverted to the donor in order to reduce the capital gains tax (see Supreme Court Decision 97Nu13979, Nov. 25, 1997).

In addition, there is no doubt as to whether the cancellation of the agreement on donation in this case constitutes a gift as mentioned above, and even if it falls under a gift, the requirement that the transfer income should be actually attributed to the donor in order to consider the plaintiffs as the transferor by applying the above provision, and this must be proved by the defendant. As seen earlier, not only was used in repayment of the loan obligation owed by AA with a volume of 1/2 of the transfer proceeds of forest land in this case, but also the remainder of the transfer proceeds has only been submitted by the plaintiff to support the claim that the transfer proceeds belong to A, and there is only any other material to support the claim that the transfer proceeds belong to B, and in light of the role of G in the process of the sales contract on forest in this case, the role of GG in the process of the sales contract on forest in this case, the relation between the plaintiffs and G and the plaintiff, and the relation between G and the Gu, the actual owner of the transfer proceeds of forest in this case may not be deemed as a transfer agent of forest in this case by applying the above provision.

3) Sub-decisions

Ultimately, the instant disposition, which is premised on the premise that the Plaintiffs are the transferor of the instant forest, ought to be seen as either the intent or illegality of the Plaintiffs’ other arguments.

3. Conclusion

Therefore, the plaintiffs' claim of this case should be accepted for the reasons, and since the judgment of the first instance is unfair with different conclusions, the appeal of the plaintiffs is accepted and the judgment of the first instance is revoked, and the disposition of this case is revoked.