[1] The legislative intent of Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act concerning the constructive gift of the property held in title trust and the burden of proving that there was no "tax evasion purpose" under Article 41-2 (1) 1 of the same Act (=the nominal person)

[2] The case holding that the "tax evasion purpose" under Article 41-2 (1) 1 of the former Inheritance Tax and Gift Tax Act cannot be deemed to exist in the above title trust in light of the fact that the title trust of stocks is aimed at avoiding a prosperity in the company's business process, and that there was no secondary tax liability or deemed acquisition tax as an oligopolistic shareholder at the time of the above title trust, and that there was no global income tax avoided from the above title trust, etc.

[1] Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002) (see current Article 45-2 (1)) / [2] Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002) (see current Article 45-2 (1))

[1] Supreme Court Decision 95Nu9174 delivered on August 20, 1996 (Gong1996Ha, 2898), Supreme Court Decision 99Du2192 delivered on July 23, 199 (Gong1999Ha, 1818), Supreme Court Decision 98Du1313 delivered on December 24, 199 (Gong2000Sang, 336), Supreme Court Decision 2003Du13649 Delivered on December 23, 2004 (Gong205Sang, 211), Supreme Court Decision 2003Du4300 Delivered on January 27, 2005 (Gong205Sang, 303Sang, 203Du736364 delivered on May 23, 2006)

Kim Dong-young et al. (Law Firm Rate, Attorneys Kim Tae-hwan et al., Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

Seoul High Court Decision 2003Nu22508 delivered on November 10, 2004

All appeals are dismissed. The costs of appeal are assessed against the defendant.

We examine the grounds of appeal.

The legislative purport of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter the same) is to recognize an exception to the principle of substantial taxation with the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice (see Supreme Court Decision 2003Du13649, Dec. 23, 2004). Thus, if the title trust is recognized to have been conducted for reasons other than the tax avoidance purpose and it is merely a minor reduction of tax incidental to the said title trust, it cannot be deemed that there was a "tax avoidance purpose" under the proviso of the same Article in such title trust, and the burden of proving that there was no tax avoidance purpose in the title trust exists a nominal person who asserts it.

In light of the aforementioned legal principles and records, it is recognized that Plaintiff Kim Young-young’s act of title trust of the instant shares was at the time of the title trust to be deemed to have been aimed at avoiding prosperity in the company’s business process when it acquired the instant shares issued by it, a permanent resident of Brazil, Co., Ltd. (hereinafter “sub-trade”). Furthermore, even if Plaintiff Kim Young-young acquired the instant shares under its own name because it was less than 51/100 of the issued stocks, it cannot be deemed that it did not constitute an oligopolistic shareholder who had the secondary tax liability or deemed acquisition tax under the Framework Act on National Taxes and the Local Tax Act, and thus, it cannot be deemed that the purpose of evading the secondary tax liability or deemed acquisition tax as an oligopolistic shareholder at the time of the said title trust was not to have been avoided due to the title trust of the instant shares due to the lack of the amount of global income tax avoided due to the title trust, and even if the third-party trade paid dividends once, it is difficult to view that the purpose of this case’s dividend income was less than the amount of global income tax evasion.

In the same purport, the court below is just in holding that the disposition of gift tax of this case, which applied Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act, was unlawful on the ground that there was no tax avoidance purpose in the title trust of the Plaintiff Kim Young-do’s shares, and there is no error of law such as misunderstanding of legal principles as to the purpose of tax avoidance

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Shin-chul (Presiding Justice)