early 2014 Heavy3191 (Law No. 102, 2015)

Where land for farming children is transferred to division of property at the time of divorce, gift tax shall be collected.

It is not consistent with the purport of the provision on reduction and exemption because it is transferred to the spouse who is not self-feasible by division of property.

Article 71 of the Restriction of Special Taxation Act (Reduction or Exemption of Gift Tax on Farmland, etc. Given to Farming Offsprings)

2015-Gu Partnership-64641 Global income and revocation of disposition

AA

o Head of the tax office

October 29, 2015

November 26, 2015

1. All of the plaintiffs' claims are dismissed.

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

Cheong-gu Office

On January 4, 2013, the Defendant confirmed that the disposition to collect gift tax against Plaintiff A was null and void, and revoked the disposition to collect inheritance tax against the Plaintiffs on November 22, 2013 (the Plaintiff stated in the complaint that the date of the disposition to impose inheritance tax was October 10, 2014, but it appears that it is erroneous.)

1. Details of the disposition;

A. On May 30, 2007, Plaintiff AA donated from his father BB on May 30, 2007, land of 00,000 - 00 - Dong (hereinafter “instant land”) and completed the registration of ownership transfer on the same day.

B. In accordance with Article 71(1) of the former Restriction of Special Taxation Act (amended by Act No. 9763, Jun. 9, 2009; hereinafter the same) (hereinafter referred to as the “instant reduction and exemption provision”), Plaintiff AA applied for reduction and exemption of gift tax on the land of this case to the Defendant at the time of the above time, and was fully exempted from gift tax.

C. On September 13, 2010, the conciliation was concluded between Plaintiff A and his spouse with the effect that Plaintiff A and CCC were divorced, and that Plaintiff A and CCC transferred the ownership of the instant land to CCC on the grounds of division of property.

D. On December 1, 2010, CCC completed the registration of transfer of ownership based on division of property with respect to the instant land.

E. On December 1, 2010, before five years have passed since the date on which Plaintiff AA donated the instant land ( May 30, 2007), the Defendant deemed that the requirements for collection stipulated in Article 71(2) of the Restriction of Special Taxation Act were met by transferring the instant land to CCC on December 1, 2010, and rendered a disposition to collect the gift tax of KRW 00 (hereinafter “instant disposition to collect the gift tax”).

F. As BB died on November 23, 2012, the Plaintiffs and DD (hereinafter referred to as “B”).

They jointly inherited the BB's property.

G. On May 31, 2013, heirs reported inheritance tax amounting to KRW 000, including the appraised value of the instant land, KRW 000,000, the taxable value of inherited property, and KRW 000,000. On November 22, 2013, the Defendant notified on November 22, 2013 that the heir shall determine the amount of inheritance tax as reported by the heir, and pay KRW 00,000, after deducting the amount of inheritance tax paid voluntarily from the final tax amount.

H. However, as reported by the inheritor, the Defendant’s prior donation property value of the instant land.

On October 10, 2014, based on the result of the inheritance tax investigation, such as that the appraised value of land, etc. 000 00 dong 000 dong 000 dong 000 is not included in the pre-donation property value, the inheritance tax was corrected and notified to the inheritor on October 10, 2014 (hereinafter referred to as "the imposition disposition of inheritance tax of this case on November 22, 2013," and "the disposition of imposition of inheritance tax of this case" is referred to as "the imposition disposition of inheritance tax of this case" and "the disposition of this case" is referred to as "each disposition

[Reasons for Recognition] Unsatisfy, Gap evidence Nos. 1 through 5, 8, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

1) As to the collection disposition of the gift tax of this case

The gift tax collection disposition of this case has the following defects, and the defect is serious and clear, and thus is void automatically.

In other words, the division of property at the time of divorce between husband and wife does not constitute a compensatory transfer due to the liquidation of joint property. The defendant does not impose capital gains tax on Plaintiff AA from the above perspective.

Although the gift tax of this case was imposed, it is inconsistent with the principle of trust and good faith.

2) Regarding the imposition of inheritance tax of this case

Since the instant land is still subject to reduction or exemption of gift tax pursuant to Article 71(1) of the former Restriction of Special Taxation Act, it is not included in the value of donated property to be added to the taxable value of inherited property pursuant to Article 71(5)

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

According to Article 71(1) of the former Restriction of Special Taxation Act, where a self-employed farmer donates farmland, etc. that meet certain requirements to a farming child, etc., the gift tax shall be exempted, and Article 71(5) of the Restriction of Special Taxation Act provides that the farmland, etc., the gift tax of which is reduced or exempted pursuant to paragraph (1) shall not be included in the value of donated property added to the taxable value of inherited property. Meanwhile, Article 71(2) of the Restriction of Special Taxation Act (hereinafter referred to as the "collection provision of this case") provides that where the farmland, etc., the gift tax of which is reduced or exempted pursuant to paragraph (1) is transferred within five years

The grounds for asserting that Plaintiff AA’s disposition of collecting gift tax of this case is unlawful do not constitute “transfer” as referred to in the collection provisions of this case, and the plaintiffs’ disposition of collecting gift tax of this case is unlawful.

The grounds for the charge are also premised on the premise that the act of the Plaintiff AA’s transfer of the ownership of the instant land to the spouse CCC pursuant to Article 71(5) of the Restriction of Special Taxation Act does not constitute “transfer” as stipulated in the collection provision of this case, because the instant land is still subject to reduction of or exemption from gift tax pursuant to Article 71(1) of the former Restriction of Special Taxation Act.

However, in light of the following circumstances, it is reasonable to view that Plaintiff AA’s act of transferring the ownership of the instant land as a division of property in divorce with CCC constitutes “transfer” as referred to in the instant collection provision.

① Since the instant collection provision does not limit “transfer” to “transfer for oil,” it is reasonable to regard “transfer” as falling under “transfer” as stipulated in the collection provision of this case, regardless of whether it is free of charge or at a cost, in the event of a de facto transfer of assets.

② The provision on reduction or exemption of this case provides that when a self-employed farmer donates farmland, etc. to a farmer, the farmer is exempted from gift tax, and its purport is to encourage succession to farming. It is reasonable to deem that the land in this case was transferred to CCC, which is not self-defensed by division of property, and thus does not fit the purport of the provision on reduction or exemption of this case, regardless of whether it is transferred or not. As long as the ownership has been transferred to CCC, it does not change even if Plaintiff AA continues cultivating the land

(3) On the other hand, capital gains tax is imposed on the taxable basis of the gratuitous transfer of assets, whereas capital gains tax is imposed on the taxable basis of gains on transfer accruing from the onerous transfer of assets.

Article 88(1) of the Acquisition Tax and Gift Tax Act (Article 88(1)) provides that gift tax and transfer income tax differs from those subject to taxation, so it cannot be deemed contradictory on the ground that the Defendant collected gift tax without imposing transfer income tax on the Plaintiff with respect to the transfer of ownership of the instant land to CCC

④ The reason for deeming that the transfer of assets by the means of division of property, at the time of divorce, does not constitute the transfer of value, which is subject to capital gains tax, is that the principal purpose of the division of property is to liquidate and distribute the actual co-owned property, which was achieved through the cooperation of both parties during marriage. In light of the developments leading up to the acquisition of the instant land by Plaintiff AA and CCC, etc., it is difficult to deem that the instant land falls under the substantial co-owned property, which was achieved by Plaintiff AA and CCC through mutual cooperation.

Furthermore, insofar as Plaintiff AA’s act of transferring the instant land to CCC within five years from the date of donation does not fall under any of the subparagraphs of Article 68(5) of the Enforcement Decree of the Restriction of Special Taxation Act that provides for exceptions to the transfer of farmland, etc. within five years from the date of donation, both the disposition of collecting gift tax and the disposition of inheritance tax are legitimate.

3. Conclusion

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