If a transfer contract deemed to be a gift or gift is rescinded, whether to impose the gift tax (negative)

Even in cases where there is a transfer of the property which is deemed to have been donated under Article 34(1) of the Inheritance Tax Act, if the transfer contract is lawfully rescinded before the tax authority imposes a disposition of levying a gift as a cause of taxation, and if the transfer contract becomes cancelled by its cancellation, the effect of the change of the real right arising from the execution of the contract shall be retroactively extinguished and the transfer which can be deemed to have never existed from the beginning. Thus, a disposition of levying a gift tax which serves as a cause of taxation shall not be issued.

Articles 29-2(1) and 34(1) of the Inheritance Tax Act

Supreme Court Decision 87Nu561 Decided July 25, 1989

[Defendant-Appellee] Plaintiff 1 et al.

Head of Nam Busan District Tax Office

Busan High Court Decision 87Gu74 delivered on October 7, 1988

The judgment below is reversed, and the case is remanded to Busan High Court.

We examine the grounds of appeal.

Even if there is a transfer of property which is deemed to be a donation under Article 34(1) of the Inheritance Tax Act, if the transfer contract is lawfully rescinded before the tax authority imposes a tax disposition imposing a gift on the grounds of the transfer, and if the transfer contract is cancelled by its cancellation, the effect of the change in the real right arising from the execution of the contract shall be retroactively extinguished and the transfer that can be seen as a gift or a gift shall not be deemed to have existed from the beginning. Thus, the imposition of gift tax on the grounds of the taxation shall not be made (see Supreme Court Decision 87Nu561 delivered on July 25, 198).

According to the facts established by the court below, the plaintiff completed the registration of ownership transfer on December 2, 1986 under the name of the non-party who was his wife, and cancelled on June 12, 1987 due to cancellation. The defendant, on July 12, 1987, imposed the gift tax of this case on the non-party's future registration of ownership transfer. If the facts are the same, the transfer between the plaintiff and the non-party should be deemed not to have existed from the beginning. Thus, the gift tax should be deemed to be illegal on the grounds of taxation.

However, in such a case, the court below did not mean if the registration under the name of the non-party was made by donation, and even if it was made by sale, it is considered as a donation pursuant to the provisions of Article 34 of the same Act. Thus, the court below held that the taxation of gift tax of this case was lawful. Thus, such judgment of the court below should be deemed to have erred by misapprehending the effect of termination of contract and the legal principles of the Inheritance Tax Act, which affected the conclusion of the judgment.

Therefore, without examining the remainder of the grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Young-ju (Presiding Justice)