[1] Whether the property value deemed donated is included in the value of donated property to be added to the taxable value of inherited property (affirmative)

[2] In a case where the additional tax on negligent tax returns on gift tax is already imposed on the donated property added to the taxable value of inherited property, whether the additional tax on negligent tax on negligent tax on inheritance can be imposed

[1] In light of the legislative intent of Article 4(1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) and the character of Article 34-2(1) of the same Act as deemed donation, it is reasonable to view that the value of property donated pursuant to Article 34-2(1) of the same Act is included in the value of donated property added to the taxable value of inherited property pursuant to Article 4(1) of the same Act.

[2] In the event that the additional tax is imposed on the additional tax on the donated property due to a failure to report the donated property at the time of the return of the inheritance tax, the imposition of the additional tax on the donated property is a result of double imposition of the additional tax on the same donated property. In the event that the additional tax is imposed on the additional tax on the negligent tax return due to a failure to report the donated property, the donated property shall not be included in the "amount under Article 26 (1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) which serves as the basis for calculating the additional tax on the negligent tax return on the inherited property.

[1] Articles 4(1) and 34-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 4662 of Dec. 31, 1993) / [2] Articles 4(1) (see Article 13(1) of the current Inheritance Tax and Gift Tax Act), 26(1) (see Article 78(1) of the current Inheritance Tax and Gift Tax Act) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993)

[1] Supreme Court Decision 94Nu2480 delivered on August 26, 1994 (Gong1994Ha, 2559) / [2] Supreme Court Decision 96Nu15862 delivered on June 27, 1997 (Gong1997Ha, 2207)

Plaintiff 1 and eight others (Attorneys Kim Dong-dong, Counsel for the plaintiff-appellant)

Head of Sungbuk Tax Office

Seoul High Court Decision 96Gu2967 delivered on July 31, 1996

The additional tax portion among the judgment below is reversed, and that part of the case is remanded to the Seoul High Court. All remaining appeals by the plaintiffs are dismissed, and the costs of appeal against the dismissed part are assessed against the plaintiffs.

We examine the Plaintiffs’ grounds of appeal.

1. On the first ground for appeal

Article 4(1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993; hereinafter "the Act") provides that "the value of an inherited property on which inheritance tax is to be levied and the value of an inherited property donated by an ancestor to a person other than an heir within five years before the commencement of the inheritance and the value of the property donated by an ancestor to a person other than the heir within three years before the commencement of the inheritance shall be the taxable value of inherited property after deducting the following amount." The legislative purport of the above provision is to prevent the act of preventing unfair reduction of inheritance taxes by evading the application of high-rate inheritance tax by donation to an heir before the commencement of the inheritance (see Supreme Court Decision 94Nu2480 of Aug. 26, 1994). Meanwhile, Article 34-2(1) of the Act provides that "in cases where the property is remarkably poor with consideration prescribed by the Presidential Decree with the exception of cases falling under Article 34, it shall be deemed that the value of the donated property and the donated property is reasonable under Article 14(2) of the Act.

In the same purport, the judgment of the court below is justified in holding that the property value deemed donated by Nonparty 1, the decedent of the deceased, was included in the taxable value of inherited property, and there is no error in the misapprehension of legal principles as pointed out in the theory of lawsuit, and it cannot be viewed as a violation of the principle of strict interpretation of tax law on the ground that it is interpreted as above. The precedents of party members cited in the ground of appeal are different cases, and it is not appropriate to invoke in this case. There is no ground for appeal.

2. On the second ground for appeal

Article 26 (1) of the Act provides that "in case where the director of the tax office fails to make a report on inherited property (including donated property added to the inherited property under Article 4) within the time limit for report under Article 20, or where he makes a report on any amount short of the tax base to be reported, an amount equivalent to 20/100 of the amount calculated by multiplying the ratio of the amount not reported or short of the tax base to be reported pursuant to Article 25 by the inheritance tax amount shall be added to the inheritance tax amount calculated." Thus, in case where the additional tax is imposed due to a failure to make a report on the donated property to be added to the taxable value of inherited property by a return on the inheritance tax, the imposition of additional tax on the donated property again is a result of imposing double additional tax on the same donated property. In case where the additional tax is imposed on the negligent tax return due to a failure to make a report on the gift tax, it is reasonable to view that the donated property does not include the amount not reported or short of the tax base to be reported.

Nevertheless, even if the gift tax was imposed on the donated property at the time of imposing the gift tax, if the plaintiffs did not report on the donated property at the time of filing the inheritance tax return, the court below held that the gift tax includes the “amount not reported or short of the tax base to be reported” under the above provision, which serves as the basis for calculating the additional tax on negligent tax on inheritance, which is erroneous in the misunderstanding of legal principles as to the calculation of the additional tax on negligent tax on inheritance

3. Therefore, the part of the judgment of the court below regarding additional tax shall be reversed, and that part of the case shall be remanded to the court below. The remaining appeals by the plaintiffs shall be dismissed. The costs of appeal against the dismissed portion shall be assessed against the losing party. It is so decided as per Disposition

Justices Shin Sung-sung (Presiding Justice)