The purport of Article 23-2(1) of the former Inheritance Tax and Gift Tax Act stipulating that the house living together shall be deducted from the taxable value of inherited property, and whether the “house in which the decedent and the heir have resided continuously for not less than 10 years retroactively from the date of commencing the inheritance” prescribed by the above provision is limited to the house owned by the decedent for not less than

Article 23-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax and Gift Tax Act”) provides that housing living together shall be deducted from the taxable value of inherited property. The purport of the provision is not only to relieve the actual user of one house for one household, but also to promote the heir’s residential stability. The period of retention of an ancestor’s house is not directly related to the heir’s residential stability. The language of the provision is merely “house living together for ten or more years retroactively from the date of commencing the inheritance.” Thus, it is difficult to view that the term “ownership” or “holding” is included in the term “house living together for ten or more years retroactively from the date of commencing the inheritance.” In full view of the above provisions, the requirement of “one-household house under Article 89(1)3 of the former Inheritance Tax and Gift Tax Act as of the date of commencing the inheritance” is separately required by the requirement of “one-year inheritance requirement” under Article 23(1)3(3(1)3)3) of the former Inheritance Tax and Gift Tax Act.

Article 23-2(1) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 9916, Jan. 1, 2010); Article 89(1)3 of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009); Article 154(1) of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 22034, Feb. 18, 2010)

Plaintiff 1

Plaintiff 2 (Law Firm White, Attorneys Shin Jong-sung et al., Counsel for the plaintiff-appellant)

Samsung Head of Samsung Tax Office

Seoul High Court Decision 2011Nu24806 decided December 27, 2011

The appeal is dismissed. The costs of appeal and the costs of incidental appeal are assessed against the appellant and the incidental appellant respectively.

1. As to the ground of appeal

Article 23-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter the same) provides that where inheritance commences due to the death of a resident, “a house in which an ancestor and his/her heir have resided continuously for ten years or more retroactively from the date of commencing the inheritance” means a house for one household under Article 89(1)3 of the Income Tax Act (including a expensive house under the same subparagraph) as of the date of commencing the inheritance, and where an heir who is a homeless as of the date of commencing the inheritance is inherited, an amount equivalent to 40/100 of the value of the house (including the value of land attached to the house) shall be deducted from the taxable value of inherited property within the limit of 50 million won. In addition, the term “house held by a resident and his/her heir under the former Enforcement Decree of the Income Tax Act (amended by Act No. 9897, Dec. 31, 2010; hereinafter the same shall apply) is, in principle, within the same residential period as his/her spouse in Korea.

The purport of Article 23-2(1) of the former Inheritance Tax and Gift Tax Act stipulating that this house shall be deducted from the taxable value of inherited property is to relieve the actual user of the house living together with one household, and to ensure the stability of the heir's residence. The period of retention of the decedent's house is not directly related to the stability of the heir's residence. Since the term "house living together with the decedent and the heir for not less than 10 years retroactively from the date of commencing the inheritance," it is difficult to view that the term "ownership" or "holding" is included in the term "house living together for not less than 10 years retroactively from the date of commencing the inheritance." In full view of the above provisions, the requirement of possession is separately required according to the requirement of "house owned by the decedent and the heir" under Article 89(1)3 of the former Inheritance Tax and Gift Tax Act as of the date of commencing the inheritance, the term "house living together for not less than 10 years retroactively from the date of commencing the inheritance cannot be deemed as continuously owned by the decedent for 10 years retroactively or longer from the date of the inheritance.

In the same purport, the court below is just in holding that since Plaintiff 2 living together with the Nonparty, who is the inheritee, for not less than 10 years retroactively from the date of commencing the inheritance of the apartment in this case, even if the inheritee did not own the apartment in this case for not less than 10 years retroactively from the date of commencing the inheritance, it constitutes a house living together subject to the inheritance deduction. In so doing, the court below did not err by misapprehending the legal principles as to the objects of the inheritance deduction under Article 23-2 (1)

2. As to the plaintiff 1's incidental appeal

When an appeal has been filed against a part of the co-litigants in ordinary co-litigations, other co-litigants than the co-litigants who are Appellee may not raise an incidental appeal (see Supreme Court Decision 94Da40734 delivered on December 23, 1994, etc.).

According to the records, in this case, which falls under ordinary co-litigation, the defendant filed an appeal only against the plaintiff 2 among the co-litigantss of the court below, but it is evident that the plaintiff 1, not the case-Appellee, files an incidental appeal after the expiration of the period for filing an appeal. Thus, the incidental appeal by the plaintiff 1 is unlawful.

3. Conclusion

Therefore, the appeal shall be dismissed, and the costs of appeal and the costs of incidental appeal shall be borne by the appellant and the incidental appellant. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)