Whether title trust property deemed donated under the Inheritance Tax Act may be included in the gains from the Corporate Tax Act (negative)

Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) only applies to the case where gift tax is imposed, and in such a case, the Corporate Tax Act does not provide for the legal fiction of gross income under the Corporate Tax Act, and as to whether the assets included in the "value of assets received without compensation" under Article 3(a) of the same Act constitute the value of assets under the Corporate Tax Act, the determination shall be made in accordance with the substance principle. Thus, the assets entrusted by the relevant corporation cannot be included in the assets registered, registered, transferred, etc., and the title trust is for the avoidance of tax, and if the trustee is not a profit-making corporation, even if the assets subject to the legal fiction of gift tax are assets subject to the legal fiction of gross income, it cannot be viewed as different from the principle

Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see Article 43(1) of the current Inheritance Tax and Gift Tax Act), Articles 3(2) and 9 of the Corporate Tax Act, Article 12(1)6 of the Enforcement Decree of the Corporate Tax Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Domin, Attorneys Park Jong-soo et al., Counsel for plaintiff-appellant)

New Jinjin Development Co., Ltd. (Attorney Jeon Jong-gu, Counsel for defendant-appellant)

the director of the tax office

Seoul High Court Decision 95Gu5228 delivered on April 25, 1996

The judgment below is reversed. The case is remanded to Seoul High Court.

The grounds of appeal are examined.

Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) only applies to the case where gift tax is imposed, and in such a case, the Corporate Tax Act does not provide for the legal fiction of gross income under the Corporate Tax Act. As to whether the assets included in the "value of assets received free of charge" under the Corporate Tax Act are included in the "value of assets under the Corporate Tax Act" should be determined in accordance with the substance principle under the substance over form principle under Article 3(a) of the same Act. Thus, the assets entrusted by the relevant corporation cannot be included in the assets registered, registered, transferred, etc. (see Supreme Court Decision 95Nu5301, May 10, 1996). Thus, the title trust is for tax avoidance, and if the trustee is not a profit-making corporation, even if the assets subject to gift tax are deemed donated, it cannot be viewed as different in the principle of no taxation without law and the principle of substantial taxation

Even based on the facts acknowledged by the court below, since the shares of this case were held in title trust in the name of the plaintiff as a profit-making corporation in order to avoid disadvantages or disadvantages under the Corporate Tax Act or the Local Tax Act because the non-party Kim Tae-jin constitutes oligopolistic shareholders, it shall not be included in the plaintiff's gross income.

Nevertheless, on the grounds of the legislative intent of the provision on deemed donation under the above Inheritance Tax Act, the lower court determined that the instant shares are included in the value of assets received without compensation to be included in the gross income under the Corporate Tax Act as long as they were trusted to the Plaintiff for the purpose of tax avoidance, thereby adversely affecting the conclusion of the judgment by misapprehending the legal doctrine of no taxation without

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Yong-hun (Presiding Justice)