Seoul Administrative Court 2014Guhap61798 ( October 10, 2015)

Cho High Court Decision 2014Du679 (2014.02)

The plaintiff received a donation from the purchase fund of apartment.

The plaintiff received the purchase price of the apartment of this case directly from the borrowed name account of the plaintiff, and the plaintiff received the return of the plaintiff's property managed by the plaintiff, but the plaintiff did not expressly state the total amount of money to be returned from the plaintiff, the amount returned, the remaining amount, etc., and received a donation from the division of the apartment acquisition fund.

Article 2 of the Inheritance Tax and Gift Tax Act

Article 41-2 of the Inheritance Tax and Gift Tax Act

2015Nu421314 Revocation of Disposition of Imposing gift tax

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*The Director of the Tax Office

Seoul Administrative Court Decision 2014Guhap61798 decided April 10, 2015

November 04, 2015

December 02, 2015

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The imposition of each of the gift tax of KRW 000,000,000 on September 19, 2007 and the gift tax of KRW 000,00,000 on October 30, 2007, which the Defendant rendered to the Plaintiff on October 14, 2013, shall be revoked.

1. As to whether the second tax investigation constitutes a duplicate tax investigation exceptionally permitted

(A) Article 81-4(1) of the Framework Act on National Taxes provides that "tax officials shall conduct a tax investigation to the minimum extent necessary for proper and fair taxation and shall not abuse their authority of investigation for any other purpose, etc." Paragraph (2) provides that "tax officials shall not conduct reinvestigation on the same item of taxation and the same taxable period unless it falls under any of the following subparagraphs," and subparagraph 1 provides that "where there is clear evidence to acknowledge a suspicion of tax evasion" in subparagraph 1 provides that "where there is clear evidence to acknowledge a suspicion of tax evasion" means cases where the possibility of tax evasion is recognized to a considerable extent based on objective and reasonable evidence (see, e.g., Supreme Court Decisions 208Du10461, Dec. 23, 2010; 201Du6083, Jan. 27, 2011)."

① The main reason why the first tax investigation results from the lack of suspicion is that the acquisition fund of the apartment of this case was collected from the Plaintiff’s 1 and 2CC account under the Plaintiff’s name, and that the funds deposited from the said account were derived from the Plaintiff’s rental income, etc.

② However, in the course of the integrated investigation into DDR, the fact that the Plaintiff’s account was used as the borrowed name account of DD and that the same amount was transferred from the account in the name of GG, which is another borrowed name account of DD, to the 2CC account of the Plaintiff.

③ This fund also was transferred from the borrowed name account in the name of GG to the second account in the name of the Plaintiff, via the second account in the name of the second account in the second account in the second order. The Defendant had reasonable grounds to suspect the result of the first tax investigation that the Plaintiff was derived from the Plaintiff’s revenue with respect to the source of the purchase fund of the apartment of this case. (C) As such, the second tax investigation constitutes a duplicate tax investigation exceptionally permitted, and thus, this part of the Plaintiff’s assertion is not acceptable.

2. Whether the Plaintiff received a donation from DoD from the taxable funds of this case

According to the facts acknowledged above, it is recognized that the subject of the taxation of this case was directly paid for the purchase price of the apartment of this case through the money transfer, such as the statement of Attached 2, from the borrowed name account of DDR to the money transfer as stated in attached Table 2, etc. If so, the plaintiff should clarify that the above funds were paid for reasons other than the donation from DD, but the testimony of DD and the witness DD and the JJ alone, which were submitted by the plaintiff, are insufficient to deem that DD was in custody as a person in parental authority, while managing the plaintiff's income as a person in parental authority, and there is no other evidence to acknowledge it. Rather, in light of the following circumstances acknowledged by comprehensively taking account of the overall purport of the facts as seen earlier and the evidence evidence, it is reasonable to view that the plaintiff received the subject of the taxation of this case as DD as the gift of this case.

① In the case of EE rental income cited by the Plaintiff as its principal source of income, all rental business affairs related to real estate rental business entities, including registration of real estate rental business entities, conclusion of a lease contract, building management (including the employment of a manager), deposit passbook account, income tax payment, etc., have been conducted in the Plaintiff’s name. However, from the time of registration of business to the time of acquisition of the apartment of this case, the Plaintiff did not participate in the rental business, and the said business was actually managed and freely used all funds related to lease income and expenditure while having been entrusted with D. It is more consistent with the empirical rule to view that D was conducted by lending its name on the ground that it was a building owner’s name rather than having managed the Plaintiff’s rental business as a person with parental authority.

② There is no evidence that DD used funds in the Plaintiff’s personal account in the Plaintiff’s name either by preparing a loan certificate or by undergoing a general accounting procedure with respect to the lending of money. In light of the Plaintiff’s personal relationship between D and DD, management of the Plaintiff’s account in the Plaintiff’s name and details of the use of funds, etc., D could only be deemed that D donated part of E building and land to the Plaintiff, but it did not appear that D had the intent to use eE building and land as the necessary business fund, etc. for profits accrued therefrom. This does not mean that D merely intended to keep or borrow the Plaintiff’s funds. This is true even if D had the intent to return the funds back to the Plaintiff upon the occurrence of surplus funds thereafter.

③ There is no evidence suggesting the specific connection flow as to what way the instant taxation target funds derived from the borrowed account in the name of DG flows from the Plaintiff’s source of funds based on the Plaintiff’s income. In other words, even if the Plaintiff had certain income, there is insufficient ground to deem that the income has not been consumed and exists as it is.

④ Even if the Plaintiff is deemed to operate the EE lease business, since the Plaintiff owned only a part of the EE land at the time and owned the remaining part of the land owned by other co-owners than DD and the Plaintiff and DD, it is difficult to deem that the total amount of rent profit between the Plaintiff and DD is the Plaintiff’s income (at short, it should be assumed that certain expenses for the portion of the land used by DD have occurred).

⑤ The Plaintiff’s assertion is insufficient to support the Plaintiff’s assertion in light of the following: (a) the details of the source of acquisition fund claimed by the Plaintiff as shown in Attachment 3 do not fully consider the consumption amount that the Plaintiff, who received high-amount income for a considerable period of time, spent under various personal names; and (b) the possibility that the Plaintiff could have received a refund from D to any other opportunity than the acquisition price of the instant apartment.

D. Therefore, the instant disposition is lawful, and the Plaintiff’s assertion on a different premise is not acceptable.

3. Conclusion

The judgment of the first instance is justifiable. The plaintiff's appeal is dismissed.