National High Court Decision 2007J3172 (Law No. 81.04)

Persons liable to pay for title trust real estate (end)

In the event of title trust of real estate with a third party, if the title truster transfers the real estate to the third party and the income accrued from such transfer belongs to the title truster, the person liable to pay the relevant capital gains tax under the substance over form principle is the title truster who is the subject of transfer, and the title trustee

The contents of the decision shall be the same as attached.

Article 94 (Scope of Transfer Income Tax of the Gu)

Article 96 (Value of Transfer)

* The case is terminated after ex officio revocation on May 21, 2009

1. The Defendant’s disposition of imposition of KRW 45,94,980 against the Plaintiff on June 1, 2007 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by the statements in Gap evidence 1-2, Gap evidence 2, Eul evidence 1-2, Eul evidence 1-2, Eul evidence 2-1, 2, and Eul evidence 3.

A. On May 8, 2001, the Plaintiff transferred the right to acquire the said real estate (hereinafter “the right to sell the instant real estate”) to Gojin-jin and Lee Jong-dong, Seoul, ○○○○-dong, 1685-O, ○○○○○○, 2010, and 2010, from ○○○○-dong, Seoul, 2001.

B. On March 31, 2005, the Plaintiff made a preliminary return on the tax base of transfer income which deducts the transfer value of KRW 1,231,41,418,00 as necessary expenses in relation to the transfer of the instant parcelling-out right from KRW 931,418,00, and the real estate brokerage commission of KRW 3,00,00 as necessary expenses, but filed a revised return on the tax base of transfer income to the effect that KRW 82,965,847, and overdue interest amounting to KRW 22,157,930, and overdue interest amounting to KRW 22,157,930, and KRW 2,07,201,777 should be added to the necessary expenses.

C. On June 1, 2007, the Defendant, without deducting the said KRW 107,201,777 from the necessary expenses, notified the Plaintiff of the correction and notification of KRW 49,94,980 for capital gains tax for the year 2005 (including additional taxes) (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an appeal with the National Tax Tribunal on August 9, 2007, but was dismissed on January 4, 2007.

2. Determination of legality of disposition

A. The plaintiff's assertion

(1) The Plaintiff’s denial of the ownership of this case was acquired in the name of the Plaintiff, and it was actually transferred to Park ○, around December 2004, for the repayment of business debts to Park ○. Thus, the actual owner of the transfer income of the right to sell this case is Park ○ or Lee ○, and the disposition of this case made on a different premise is unlawful.

(2) A total of KRW 107,207,200 for overdue management expenses and KRW 107,201,777 for the loan interest related to the sale price, KRW 82,965,847 for overdue interest, KRW 22,157,930 for overdue interest, and KRW 2,07,00 for overdue management

(b) Related statutes;

Article 94 (Scope of Transfer Income Tax of the Gu)

Article 96 (Value of Transfer)

(c) Fact of recognition;

The following facts may be acknowledged either as disputed between the parties or as a whole by considering the whole purport of the pleadings in relation to Gap, 3, 5, 6, Gap's evidence 4-1, 2, Gap's evidence 7-1, 7-4, and witness's testimony.

(1) On August 10, 1979, the Plaintiff was enrolled in the fourth grade of ○○ University at the time of selling the said apartment from the subject stock company.

(2) The plaintiff operated ○○ Textiles from February 15, 1983 to February 10, 2006, prior to the purchase of the above apartment.

(3) The Plaintiff entered the Gun on September 13, 2004, but was discharged from military service on November 12, 2006.

(4) The interest on the above apartment sales payment loan was paid on several occasions in the bank account in the name of the Plaintiff, and ○○○, the Plaintiff’s mother, remitted money equivalent to the interest on the said loan to the account in the name of the Plaintiff on the date of payment of interest on the said loan. In addition, if ○○○ was to exclude the details of transfer of money equivalent to the credit card payment on the date of settlement of credit card payment and the details of transactions in which credit card payment was settled, the said details of transactions in the account were to be executed at least 10,000 won.

(5) At the time of the transfer of the right to sell the instant apartment, the variable and the number of gambling was replaced by the Plaintiff. At the time of the conclusion of the contract, ○○○○ received the down payment after holding the said apartment sales contract and concluding the contract with the Plaintiff. Upon the remainder payment, ○○ and ○○○○ received the down payment with a certificate of personal seal impression issued by the Plaintiff himself/herself, and ○○○ and ○○○ received the remainder after leading the process for change in the name of the seller and receiving the remainder, and entered the Plaintiff’s name on the down payment and remainder receipt

D. Determination

In light of the principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes, if a title truster transfers real estate to a third party and income from such transfer was attributed to the title truster, the taxpayer of the relevant capital gains tax is the title truster who is the subject of the transfer, and the title trustee is not the taxpayer (see, e.g., Supreme Court Decision 80Nu545, Jun. 9, 1981).

However, in light of the above facts and the facts of recognition, it is reasonable to view that ○○ Co., Ltd. borrowed the Plaintiff’s name and transferred the right to dispose of the said apartment to ○○○ Park, and accordingly, transferred the right to sell the instant apartment to ○○○○ and ○○○○○○. As such, ○○ is the subject of the transfer of the right to sell the instant apartment and the subject of the actual ownership of the capital gains, and ○○ is the trustee, and ○○ is the subject of the economic benefits accrued to ○○ Co., Ltd. according to the obligation and obligation with ○○ Co., Ltd., and ○○○ is the subject of the economic benefits accrued to ○○ Co., Ltd. from the transfer of the right

Therefore, the sales right of this case is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified, and it is so decided as per Disposition.