Seoul Administrative Court 201Guhap31277 ( October 13, 2012)

National Tax Service Review Inheritance 2011-001 (O. 22, 2011)

Imposition of inheritance tax by reason of testamentary gift does not constitute double taxation.

Even if a testamentary gift was actually received due to death, it does not constitute double taxation to impose inheritance tax on the ground that real estate was testamentary gift inasmuch as the Plaintiffs failed to pay gift tax by applying the provision on deemed donation for real estate.

2012Nu505 Revocation of the imposition of inheritance tax

Long-gu et al.

Samsung Head of Samsung Tax Office

Seoul Administrative Court Decision 201Guhap31277 decided January 13, 2012

October 23, 2012

December 21, 2012

1. All appeals filed by the plaintiffs are dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the first instance shall be revoked.

The Defendant’s imposition of each inheritance tax of KRW 000 against Plaintiff A on October 11, 2010, KRW 000 against Plaintiff 2B, and KRW 000 against Plaintiff 2, respectively, shall be revoked.

1. Quotation of judgment of the first instance;

The court's reasoning concerning this case is the same as the reasoning of the judgment of the court of first instance, except for the part determined additionally as stated in Article 8 (2) of the Civil Procedure Act. Thus, the court's reasoning is cited as it is in accordance with the main sentence of Article 420 of the Civil Procedure Act.

2. Additional determination

A. The plaintiffs' additional proposal

Article 32-2(1) of the Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990; hereinafter the same shall apply) provides that where the actual owner and the nominal owner are different from each other with respect to the property that requires the transfer or exercise of the right, registration, transfer of title, etc. (hereinafter referred to as "registration, etc."), the actual owner shall be deemed to have donated to the nominal owner on the date when the registration, etc. is made to the nominal owner, notwithstanding Article 14 of the Framework Act on National Taxes. Thus, even if the netCC is the property whose title is trusted to the Plaintiff the real estate listed in the attached Table 2 list, the liability to pay gift tax shall be established on the Plaintiffs pursuant to the provisions on the deemed donation of title trust, and it cannot be deemed that the inheritance tax liability is established on the grounds of the actual legacy, etc. after the title trust, the disposition of this case on another premise is unlawful.

B. Determination

(1) The legal fiction of donation under Article 32-2(1) of the Inheritance Tax Act is the legislative purport of recognizing an exception to the principle of substantial taxation in order to effectively prevent the act of tax avoidance using the title trust system and realize the tax justice. This is only applicable to the case where gift tax is imposed on a trustee. Even if the above legal fiction of donation is applied in domestic affairs and the gift tax is imposed, the substance of the relevant transaction is not confirmed as a donation. Therefore, even if the provision on the legal fiction of donation is applied to the property under the title trust of an ancestor and the gift tax may be imposed on the trustee, the substance of the relevant transaction does not change from the fact that the property belongs to the ownership of the decedent, who is the truster, and thus, such property is naturally deemed to belong to the inherited property at the time of the death of the decedent (see, e.g., Supreme Court Decisions 2002Du16865, Jul. 28, 2005; 200Du12137, Sept. 24, 2004).

(2) On the other hand, as recognized earlier, each of the above real estate is recognized as property trusted to the plaintiffs, and even if the gift tax may be imposed pursuant to the constructive gift provision, since each of the above real estate is not owned by the plaintiffs, a trustee, the property is not substantially owned by the plaintiffs. Therefore, the inheritance tax can be levied by including the property of the network headCC as the property owned by the truster. Meanwhile, even if the plaintiffs received a testamentary gift due to the death of the network headCC under the conditions that the gift tax can be imposed pursuant to the constructive gift provision on each of the above real estate under the nominal title trust, so long as the plaintiffs did not pay gift tax because the defendant did not apply the constructive gift provision on each of the above real estate, it is reasonable to deem that the imposition of gift tax by the plaintiffs on the ground that the above real estate was bequeathed

3. Conclusion

Therefore, the plaintiffs' claim seeking the cancellation of the disposition of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is justified as it is consistent with this conclusion, and it is so decided as per Disposition.