Whether the value of stocks imposed by the title trust agenda can be seen as the acquisition value.

In the case of the title trust of shares, imposing gift tax on the trustee is merely a sanction to prevent the act of tax avoidance, and the acquisition value of the shares cannot be deemed as acquisition value, and the amount of gift tax paid cannot

Article 97 (e) of the Income Tax Act

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 defendant's imposition of capital gains tax of KRW 357,817,80 for the year 1999 against the plaintiff on May 18, 2004, KRW 10,572,290 for the year 200, KRW 343,725,90 for the year 200, KRW 127,867,220 for the year 202, and KRW 43,820 for the year 203,350 shall be revoked.

1. Details of the disposition;

Evidence Nos. 1 through 3, Eul evidence Nos. 1-2, Eul evidence Nos. 2 through 10, and the purport of the whole pleadings

A. On May 30, 199, the Plaintiff acquired 60,000 shares (hereinafter “the initial shares”) of ○○○○ Co., Ltd. (hereinafter “○○”) from his/her own partner, in 30,000 won per share, 500 won per share.

B. The Plaintiff deposited 30,000 shares out of the above 60,000 shares in the shares consignment account under the name of Ma○○○○, and changed the entry by depositing the remaining 30,00 shares in the shares consignment account under the name of Ma○○○.

C. After that, according to the Non-Party Company’s grant of free capital, 4,286 common shares each on July 16, 1999, and 25,586 common shares and 27,286 common shares each were allocated to Ma○○ on February 7, 200, to Ma○○○ on February 7, 200 (the sum of 62,444 common shares above).

D. The Plaintiff transferred 122,44 shares in the initial shares of this case and 122,44 shares in the Association Registration Market, 1999, 6,000 shares in the Association Registration Market, 70,572 shares in 2001, 20,000 shares in 20,000 shares in 20,000 shares in 202, and 11,172 shares in 203, respectively.

E. On the other hand, on May 18, 2004, the defendant imposed capital gains tax of KRW 368,401,80 for the portion belonging to the year 1999, KRW 14,532,290 for the portion belonging to the year 200, KRW 377,889,90 for the portion belonging to the year 2001, KRW 128,097,170 for the portion belonging to the year 2002, and KRW 43,820,350 for the portion belonging to the year 203.

F. On June 28, 2004, the Plaintiff filed a request with the National Tax Tribunal for a national tax trial. On December 17, 2004, the National Tax Tribunal rendered a decision citing part of the Plaintiff’s request to the effect that, in calculating the gains on transfer of stocks transferred at a low price by each taxable period, the portion of the amount deemed donated due to the acquisition of stocks at a low price under the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”).

G. Accordingly, on December 24, 2004, the Defendant imposed and notified the Plaintiff of each transfer income tax of KRW 357,817,80 for the portion reverted to the year 1999, KRW 10,572,290 for the portion reverted to the year 2000, KRW 343,725,90 for the portion reverted to the year 2001, KRW 127,867,220 for the portion reverted to the year 202, and KRW 43,820,350 for the portion reverted to the year 202 (hereinafter “the disposition of this case”).

2. Whether the lawsuit of this case is lawful

A. The parties' assertion

As to the Defendant’s assertion that the disposition of this case was lawful on the grounds of the above disposition and relevant statutes, the Plaintiff asserted that the disposition of this case was unlawful on the grounds as follows.

(1)On the ground that the new title trust contract was concluded with the Plaintiff at the time of the instant gratuitous transfer, the Plaintiff is deemed to have been donated the instant gratuitous transfer pursuant to Article 41-2(1)1 of the former Inheritance Tax and Gift Tax Act, and the tax authority received a disposition imposing gift tax by evaluating the value per share of the instant gratuitous transfer as KRW 162,426, by assessing the value per share of the instant gratuitous transfer as KRW 162,426. Thus, the Defendant’s calculation of the taxable value of gift tax calculated by assessing the value per share of the instant gratuitous transfer as KRW 162,426 is unlawful.

(2) The Plaintiff paid gift tax imposed by the tax authority pursuant to Article 4(5) of the Inheritance Tax and Gift Tax Act on the initial shares of this case and on the gift of title trust property under the Inheritance Tax and Gift Tax Act on the gratuitous shares of this case as a joint and several taxpayer. Therefore, even though the amount of such gift tax is recognized as necessary expenses in the disposition of this case, it is against the principle of double taxation prohibition if it is not recognized as necessary expenses.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Determination as to the assertion of the above 2. A(1)

(A) Under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law, barring any special circumstances. It is not allowed to expand or analogically interpret the provisions without reasonable grounds, and it is also consistent with the principle of fair taxation to strictly interpret the provisions that clearly stipulate special provisions among the provisions on reduction and exemption requirements (see Supreme Court Decision 2003Du7392, May 28, 2004).

(B) The legislative purpose of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize exceptions to the principle of substantial taxation in order to realize tax justice by effectively preventing the act of tax avoidance using the title trust system. This is only applicable to the case where gift tax is imposed on a trustee. Even if the provision on deemed gift for domestic affairs is applied and the gift tax is imposed, the substance of the relevant transaction is not confirmed as a gift (see, e.g., Supreme Court Decision 2002Du12137, Sept. 24, 2004).

(C) The taxation authority imposed gift tax calculated by evaluating the value per share of the instant gratuitousism as KRW 162,426 on the ground that the tax authority entered into a new title trust contract with the Plaintiff at the time of transferring the instant gratuitous ownership under Article 41-2 (1) 1 of the former Inheritance Tax and Gift Tax Act by reason of the fact that the tax authority entered into a new title trust contract with the Plaintiff at the time of transferring the instant gratuitous ownership is merely imposing gift tax on ○ and ○○○ in the form of sanction in order to effectively prevent the tax avoidance by using the title trust system. Therefore, it cannot be deemed that the Plaintiff under Article 97 (1) 1 of the Income Tax Act was the actual transaction price required for the acquisition of the instant gratuitous ownership, and there is no evidence to acknowledge that the Plaintiff had paid the Plaintiff the price

(2) Determination as to the assertion of the above 2. A. (2)

(A) Gift tax and capital gains tax vary between the requirements, timing, and taxpayers for the establishment of tax liability. Thus, in imposing each tax, the tax authority shall independently make a determination in accordance with the substance of each taxation requirement. If the tax authority meets all the requirements of the above provisions, only one taxation can be made unless there is a special provision excluding overlapping application (see, e.g., Supreme Court Decision 2002Du12458, May 13, 2003).

(B) Even if the Plaintiff paid gift tax imposed on ○○ and ○○○○ in accordance with the deemed gift of title trust property under the Inheritance Tax and Gift Tax Act on the initial shares of this case and the instant gratuitous shares, the interpretation of the tax law should be interpreted as prescribed by the law, barring any special circumstance, barring any special circumstance, and the final interpretation or analogical interpretation without reasonable grounds is not allowed in light of the legal principle that the amount of the gift tax in this case is not recognized as necessary expenses under Article 97(1) of the Income Tax Act and Article 163 of the Enforcement Decree of the same Act (the Plaintiff is deemed to have paid gift tax imposed on ○○ and ○○○○○ in order to effectively prevent the tax avoidance by using the title trust system. This is an expenditure that is not directly related to the transfer of the instant gratuitous ownership.) The Plaintiff does not change the status of a joint taxpayer under Article 4(5) of the Inheritance Tax and Gift Tax Act. The gift tax imposed on ○○ and ○○○ in accordance with the deemed gift of title trust property and the Plaintiff cannot be deemed to violate the prohibition principle

(C) Therefore, the Plaintiff’s assertion on this part is without merit, and the Defendant’s disposition of this case is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just and it is so decided as per Disposition.

Related Acts and subordinate statutes

Article 97 of the Income Tax Act (Calculation of Necessary Expenses for Transfer Income Tax)

(1) In calculating gains on transfer of a resident, necessary expenses to be deducted from the transfer value shall be as follows:

1. Acquisition value;

(b) In cases of assets falling under Article 94 (1) 3 and 4, the actual transaction price required for the acquisition of the relevant assets;

(c) In the case of proviso (a) or (b), where it is impossible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value

4. Transfer expenses, etc. prescribed by Presidential Decree.

(3) The calculation of necessary expenses for transfer income under paragraphs (1) and (2) shall be based on the following subparagraphs:

1. Where the acquisition value is based on the provisions of subparagraph 1 (a) (proviso) or (b) of paragraph (1), the necessary expenses shall be the sum of the amount under paragraph (1) 1 (a) (where it falls under paragraph (2), the amount under paragraph (2)) and the amount under subparagraphs 2 through 4 of the same paragraph; and

2. In other cases than subparagraph 1, necessary expenses shall be prescribed by Presidential Decree in relation to necessary expenses such as the scope of actual transaction price required for acquisition, calculation of an amount equivalent to gift tax, etc.

Article 163 (Necessary Expenses for Transferred Assets)

(5) The term “transfer expenses, etc. prescribed by the Presidential Decree” in Article 97 (1) 4 of the Act means those falling under one of the following subparagraphs:

1. Expenses paid directly for a transfer of assets falling under any subparagraph of Article 94 (1) of the Act, and securities transaction tax paid under the Securities Transaction Tax Act;

(9) In the application of the provisions of Article 97 (1) 1 (a) (proviso) and (b) of the Act to the assets received by inheritance or donation (excluding the donation under the provisions of Articles 33 through 42 of the Inheritance Tax and Gift Tax Act), the value assessed under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or the date of donation shall

Article 4 (Gift Tax Liability)

(5) In a case falling under paragraph (2) and Article 45-2, the donor shall be jointly and severally liable for payment with the donee even if the donee does not fall under any of subparagraphs of paragraph (4).

○ former Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of Dec. 30, 2003)

Article 35 (Presumption of Donation at Time of High Price Transfer)

(1) Where the property is transferred or acquired to a person falling under any of the following subparagraphs, an amount equivalent to the difference between the price and the market price thereof shall be deemed to have been donated to him as prescribed by the Presidential Decree:

1. The transferee of the property, in case where he takes over the property from a person having a special relationship at a price below the market price;

Article 41-2 (Presumption of Donation of Title Trust Property)

(1) Where the actual owner and the nominal owner are different from the property which requires a registration, etc. for the transfer or exercise of rights (excluding land and buildings; hereafter the same shall apply in this Article), the value of the relevant property shall be deemed to have been donated by the actual owner on the date (where the property is subject to a change of ownership, referring to the date following the last day of the year including the date of acquisition of ownership, if the property is the property requiring a change of ownership), notwithstanding the provisions of Article