Gwangju District Court-2015-Gu Partnership-1229 ( October 20, 2016)

Examination Donation 2015-0033 (24. 2015.06.24)

Return of donated property of a donee shall be made within six months from the last day of the month to which the date of donation belongs.

Return of donated property by a donee shall not be levied a gift tax within six months from the last day of the month to which the date of donation belongs, and the return of donated property after the lapse of several years shall be subject to the imposition of a gift tax.

Article 31 (Scope of Donated Property)

Article 68 of the Inheritance Tax and Gift Tax Act

The revocation of revocation of disposition imposing gift tax on Gwangju High Court 2016Nu511

AA

○ Head of tax office

Gwangju District Court 2015Guhap1229 Revocation of Disposition of Imposing Gift Tax

2017.06.08

oly 2017.13

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s disposition of imposition of KRW 29,277,370 against the Plaintiff on January 2, 2015 shall be revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. The network CCC (hereinafter referred to as "the network") is the husband of the Plaintiff, and BB is the Plaintiff's starting machine.

B. The registration was completed as follows with respect to each of the instant parcels of ○○ OOO-gun 55 and 4 parcels of 666, 777, 888, 999, hereinafter referred to as “each of the instant parcels of land”).

Parcel Number

/ Acquisition Date / Grounds for Registration

OOO-O-O-O-O-5

BB

June 8, 2007

Donations

Deceased

July 10, 2007

Donations

July 30, 2009

Inheritance

BB

April 16, 2010

Donations

DD, EE

June 8, 2010

The same Ri 66

FF

(GGG prior to the opening of life cards)

June 24, 2010

Sales

The same Ri 77

BB

December 21, 1994

Preservation Registration

Deceased

May 11, 2006

Donations

H H H

June 23, 2010

Sales

same Ri 888

The same Ri 99

C. On January 2, 2015, the Defendant imposed a gift tax of KRW 43,388,430 on each of the instant land (donations 184,502,260) on April 16, 2010, on the ground that BB did not pay the gift tax, and determined that it was difficult for BB to secure a tax claim due to the lack of ability to pay the delinquent tax, the Defendant designated the Plaintiff as a joint and several taxpayer and notified the Plaintiff of the payment of the gift tax.

D. The Plaintiff filed an objection against the Defendant on March 24, 2015, but was dismissed on April 22, 2015, and filed a request for examination with the Commissioner of the National Tax Service on May 20, 2015, but was dismissed on June 24, 2015.

E. Meanwhile, around April 1, 2015, the Defendant: (a) deemed the gift value of each of the instant lands as KRW 141,902,260 (=184,502,260-42,600,600) on the ground that the value of each of the instant lands was corrected to KRW 60,000, not by KRW 102,600,000; and (b) revised the gift tax to KRW 29,277,370 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 7 (including each number if there are separate numbers), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) BB donated each of the instant land to the Deceased, but terminated the donation contract after the Deceased’s death and received the return of the said land. However, since the registration was made in the name of the Plaintiff based on inheritance after BB’s donation, the Plaintiff did not make a registration of cancellation of ownership and returned the ownership transfer registration in the form of ownership transfer registration. Therefore, the instant disposition based on the premise that the Plaintiff donated each of the instant land to BB is unlawful.

2) Each of the instant lands was the land donated by the Deceased from BB, and the CF, a pilot, forced the Deceased to return each of the instant lands before BB due to the Deceased’s death, and returned each of the instant lands again. Since CF immediately sold each of the instant lands and received the payment of the purchase price, the actual acquisitor of each of the instant lands is CF. Accordingly, the instant disposition based on the premise that the donor is BB is illegal disposal in violation of the substance over form principle.

3) Even if the Plaintiff’s donation of each of the instant land to BB, it is unreasonable to take the instant disposition on January 2, 2015, near the five-year period of donation.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Determination as to the assertion that the ownership of BB was merely recovered and it was not a gift

According to Article 31(4) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015); where a donee returns the donated property to a donor or re-donates the donated property to the donor within the deadline for filing a report under Article 68 by agreement between the parties concerned, the donation shall be deemed not to have existed from the beginning. According to Article 68(5) of the same Act, where a donee returns the donated property to the donor or re-donates the donated property to the donor within three months after the deadline for filing a report under Article 68 expires, gift tax shall not be imposed on the returned property or re-donates; Article 68(1) of the same Act provides that a person liable to pay gift tax shall report the taxable value

In full view of the above provisions, the return of donated property by a donee is not subject to gift tax within 6 months from the end of the month in which the gift was made, and even if BB received the return of each of the instant land that was donated to the deceased on April 16, 2010 by completing the registration of transfer of ownership in its own name as the plaintiff's assertion, as seen above, BB shall be subject to gift tax after the lapse of several years from 2006 to 2007 where each of the instant land was donated to the deceased. The plaintiff's assertion against this is without merit.

2) Determination as to the assertion that donee is CF rather than BB

In full view of the aforementioned evidence, evidence No. 5-1 and No. 5-2, and the following facts and circumstances that can be acknowledged by the Plaintiff’s results of the Plaintiff’s questioning and the purport of the entire pleadings, the other party who donated each of the instant land around April 16, 2010 can be identified as BB, a registration titleholder, and the instant disposition based on such premise is lawful.

A) Around April 2010, BB and CF found the Plaintiff several times, and determined that each of the instant lands owned BB was returned, and the Plaintiff continued to demand that CF prepare necessary documents and affixed seals. The CF completed the registration of ownership transfer in the name of BB, which was based on donation with respect to each of the instant lands.

B) At the time of completion of the registration of transfer of ownership under BB, CF concluded that the Plaintiff would not dispose of each of the instant land before BB’s birth.

C) The Plaintiff, not only at the time of filing an objection or a request for examination as to the instant disposition, but also until the filing of the instant lawsuit, returned each of the instant lands to the Deceased, which was that BB donated to the Deceased, and that BB would terminate the donation contract after the Deceased’s death. While the cancellation of ownership should be registered to BB to return the ownership, the Plaintiff has claimed that the registration of inheritance was made under the name of the Plaintiff, and therefore, the registration of ownership transfer was made under the name

D) The Plaintiff asserted that, after registering each of the instant lands in BB’s name, the person who acquired the price by selling it to a third party is not BB but CF, and thus, CF should be deemed a substantive donee. However, as seen earlier, BB and CF tried to recover ownership in the name of BB after returning each of the instant lands received by the deceased, and the Plaintiff prepared documents related to the transfer of ownership with the intention to return them to BB, and actually completed the transfer of ownership in the name of BB due to donation. As such, solely on the basis of the Plaintiff’s assertion, the Plaintiff cannot be deemed as CF rather than BB, by the person who received each of the instant lands from the Plaintiff.

3) Determination on the assertion that imposing gift tax is unreasonable after five years have elapsed since the donation

According to Article 26-2(1)4 of the Framework Act on National Taxes, gift tax cannot be imposed after the expiration of the ten-year period (15-year period in cases where a registration statement is not filed) from the date on which it is assessable. As seen earlier, the instant disposition was issued on January 2, 2015 for which five years have not passed since the date on which the donation was made. Therefore, there is no other circumstance to deem that the instant disposition was made within the exclusion period for imposition, and there is no other reason to deem it unlawful in relation to the instant disposition. The Plaintiff’s assertion on this part is without merit.

3. Conclusion

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

Related Acts and subordinate statutes

Article 2 (Gift Tax Taxables) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 13557, Dec. 15, 2015)

(3) The term "donation" in this Act means a gratuitous transfer (including transfer at a remarkably low price) of any tangible or intangible property, the economic value of which can be calculated, in a direct or indirect manner, regardless of the name, form, purpose, etc. of such act or transaction, or an increase in the property value of another person by contribution.

Article 4 (Gift Tax Payment Liability)

(4) Where a donee falls under any of the following cases, a donor shall be jointly and severally liable to pay gift tax payable by the donee: Provided, That this shall not apply to cases falling under subparagraph 3 of Article 32 and Articles 35 through 39, 39-2, 39-3, 40, 41, 41-3 through 41-5, 42, 45-3 and 48 (limited to cases prescribed by Presidential Decree where a contributor is not responsible for the operation of the relevant public-service corporation):

1. Where it is difficult to secure a tax claim because the domicile or residence is unclear;

2. Where it is deemed difficult to secure a gift tax claim even after the disposition on default is made due to the lack of ability to pay gift tax.

Article 31 of the Inheritance Tax and Gift Tax Act (Scope of Donated Property)

(4) Where the property donated (excluding money) is returned within the reporting deadline under Article 68 by an agreement between the parties concerned after donation, donation shall be deemed never made: Provided, That this shall not apply where the tax base and amount of tax are determined pursuant to Article 76 before donation is returned.

(5) Where a donee returns the donated property (excluding money) to a donor or re-donates it to a donor within three months after the deadline for reporting under Article 68 expires, gift tax shall not be imposed on such returned or re-donates.

Article 68 of the Inheritance Tax and Gift Tax Act (Gift Tax Return)

(1) A person liable to pay gift tax pursuant to Article 4 shall file a report on the taxable value and tax base of gift tax under Articles 47 and 55 (1) with the head of the competent district tax office having jurisdiction over the place of tax payment within three months from the last day of the month to which the date of donation belongs, as prescribed by Presidential Decree: Provided, That the deadline for filing a report on the tax base of gift tax following listing of unlisted stocks or a merger of corporations, etc. under Articles 41-3 and 41-5 shall be three months from the last day of the month to which the date of settlement belongs, and the deadline for filing the tax base of gift tax under Article 45-3 shall be three months from

Article 26-2 of the Framework Act on National Taxes (Period for Exclusion from National Tax Imposition)

(1) No national tax may be levied after the period prescribed in the following subparagraphs expires: Provided, That where a mutual agreement procedure is in progress in accordance with the treaty for the prevention of double taxation (hereinafter referred to as "tax treaty"), Article 25 of the Adjustment of International Taxes Act shall apply:

4. Notwithstanding subparagraphs 1, 1-2, 2 and 3, in cases of an inheritance tax or gift tax, it shall be for ten years from the date on which it is assessable: Provided, That it shall be 15 years from the date on which it is assessable, in any of the following cases:

(a) Where a taxpayer evades inheritance tax or gift tax, or receives a refund or deduction by unlawful means;

(b) Where a return is not filed under Articles 67 and 68 of the Inheritance Tax and Gift Tax Act;

(c) Where a person who files a return under Articles 67 and 68 of the Inheritance Tax and Gift Tax Act has any false statement or omission in the return, as prescribed by Presidential Decree (limited to the portion which is reported falsely or omitted);