[1] Legislative intent of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, which is a provision on deemed donation of title trust property, and whether the main text of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act applies in cases where registration, etc. under a title trust agreement becomes invalid due to a violation

[2] In a case where Gap corporation acquired treasury stocks under the name of institutional investors, including Eul corporation, etc. for the purpose of price management by borrowed name, and thereafter let individual shareholders, such as Byung, acquire the stocks acquired by institutional investors, and transfer part of them to the future, and the tax authorities imposed gift tax on Byung and other individual shareholders pursuant to Article 41-2 of the former Inheritance Tax and Gift Tax Act, and notified Gap corporation of joint and several gift tax payment, the case holding that the court below erred in the misapprehension of legal principles on the ground that the above disposition was unlawful on the ground that Gap corporation's acquisition of treasury stocks in the name of individual shareholders is null and void per annum, and thus the above provision cannot be applied

[3] The person who bears the burden of proving whether there was "the purpose of tax avoidance" under Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act, which is the provision on deemed donation of title trust property, and that there was no such purpose (=person under the name)

[4] In a case where Gap corporation acquired the treasury stocks under the name of institutional investors, including Eul corporation, etc. for the purpose of price management by borrowed name, and thereafter let individual shareholders, including Byung, acquire the stocks acquired by institutional investors, and transfer part of them to the future, and the tax authorities imposed gift tax on Byung and other individual shareholders pursuant to Article 41-2 of the former Inheritance Tax and Gift Tax Act, and notified Gap corporation of joint and several gift tax payment, the case holding that Gap corporation had the purpose of tax avoidance while implementing a title trust agreement with individual shareholders

[1] The legislative intent of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002) is to recognize an exception to the principle of substantial taxation to the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. The tax as referred to in Article 41-2(1)1 of the said provision proviso provides that the said provision is not limited to the gift tax; the said provision stipulates that the actual owner and the nominal owner shall be subject to regulation; the said provision does not require that the registration, etc. in the name of the nominal owner should be legally effective; and the purpose of tax avoidance can be achieved even if the registration, etc. in accordance with the title trust agreement is null and void due to a violation of the mandatory law, etc.

[2] The case holding that the court below erred in the misapprehension of legal principles on the ground that the above disposition was unlawful on the ground that the taxing authority imposed gift tax on the individual shareholders, including Byung, pursuant to Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), which is a provision on the constructive donation of nominal trust property, and imposed a joint and several tax payment notice of gift tax on the company Gap as a joint and several taxpayer, on the ground that Gap's acquisition of treasury stocks in the name of individual shareholders does not correspond to exceptionally permitted cases under the Commercial Act or the Securities and Exchange Act, since it is null and void because it does not necessarily mean that the acquisition of treasury stocks in the name of individual shareholders does not correspond to cases where it is exceptionally permitted under the Commercial Act or the Securities and Exchange Act, and thus, it cannot be imposed on individual shareholders by applying the above provision.

[3] In light of the legislative intent of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), if the title trust was deemed to have been made for any reason other than the purpose of tax avoidance, and only a minor tax reduction incidental to the title trust takes place, it cannot be readily concluded that there was a "tax avoidance purpose" in such title trust. However, it cannot be concluded that there was a "tax avoidance purpose" in such title trust, unless the purpose of tax avoidance was not included in the title trust purpose. However, it is impossible to determine that there was an intention of tax avoidance by applying the proviso of the above provision only when the purpose of tax avoidance was not included in the title trust purpose, and it cannot be said that there was no other purpose of tax

[4] The case holding that in case where Company A, upon the decline in the share price, decided to mobilize the operating force to manage the shares by borrowed name, acquired the shares under the name of institutional investors, including Company B, etc., and thereafter let individual investors acquire the shares acquired by institutional investors, and thereafter transfer some of them to the personal shareholders in the future, and the tax authorities imposed gift tax on Company C and other individual shareholders pursuant to Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), which is the provision on the constructive donation of title trust property, and designated Company A as joint and several taxpayers and notified joint gift tax payment, considering the fact that Company A transferred the shares acquired under the name of institutional investors, considering the fact that Company B and other individual investors acquired the shares under the name of institutional investors including Company B, it is reasonable to view that Company A had avoided the burden of corporate tax by converting the shares under the name of company A into the name of the main purpose other than the stock price management.

[1] Article 41-2 (1) (see current Article 45-2 (1)) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002) / [2] Article 41-2 (1) (see current Article 45-2 (1)) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), Articles 341, 341-2, 342-2, and 342-2 of the Commercial Act, Article 188-4 (4) 1 (see current Article 165-2 (3) of the Financial Investment Services and Capital Markets Act) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8635 of Aug. 3, 200) / [3] Article 188-4 (2) 4 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 678-128 of Dec. 18, 2004) of the current Article 47-18-2 of the former Act)

[3] Supreme Court Decision 2007Du19331 Decided April 9, 2009 (Gong2009Sang, 670)

Italy transit Co., Ltd. and three others (Law Firm Rate, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Head of the Guro Tax Office and four others (Law Firm Dog, Attorneys Dog-go, et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2006Nu30142 decided July 24, 2007

Of the judgment of the court below, the part concerning the notice of joint and several tax payment of each gift tax on the plaintiff peting corporation and the part concerning the plaintiff 2, 3, and 4 shall be revoked, and this part of the case shall be remanded to the Seoul High Court. The appeal by the defendant Kuro Tax Office is dismissed. The costs of appeal by the defendant Kuro Tax Office are

The grounds of appeal are examined.

1. As to the grounds of appeal by the remaining Defendants except for the defendant Guro Tax Office

A. Comprehensively taking account of the evidence of employment, the lower court determined that: (a) the Plaintiff Company’s acquisition of the Plaintiff Company’s shares under the name of the Plaintiff Company No. 2 was illegal on August 11, 199 by taking account of the following facts: (b) the Plaintiff Company’s acquisition of the Plaintiff Company No. 2’s shares under the name of the Plaintiff Company No. 30 and the Plaintiff Company No. 2’s acquisition of the Plaintiff Company’s shares under the name of the Plaintiff Company No. 30; and (c) the Plaintiff Company No. 1 and the Plaintiff Company No. 2 acquired the Plaintiff Company’s shares no more than 0 shares under the name of the Plaintiff Company No. 9,000 shares for the purpose of tax evasion; and (d) the Plaintiff Company No. 2 acquired the Plaintiff Company No. 70 shares under the name of the Plaintiff Company No. 9 and no more than the Plaintiff Company No. 2’s transfer of the Plaintiff Company’s shares to the Plaintiff Company No. 1 and No. 6086.

B. However, we cannot agree with the judgment of the court below for the following reasons.

(1) The main text of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002) provides that “where the actual owner and the title holder are different with respect to the property that requires a registration, etc. for the transfer or exercise of the right, the value of the relevant property shall be deemed to have been donated to the actual owner on the date when it is registered, etc. as the title holder, notwithstanding Article 14 of the Framework Act on National Taxes, by the title holder, notwithstanding the provisions of Article 14 of the same Act.” Article 1 of the proviso provides that “The same shall not apply to the case where the property

The legislative purport of the instant legal provision is to recognize an exception to the substance over form principle to the purport that effectively prevent tax avoidance by using the title trust system, thereby realizing the tax justice. In light of the fact that the tax referred to in the proviso of the instant legal provision is not limited to the gift tax, that the legal provision of this case requires that the actual owner of the property should regulate the case where the nominal owner is different from the nominal owner, and that the registration, etc. in the future of the nominal owner is not required to be legally effective, and that the purpose of tax avoidance can be achieved even where the registration, etc. is null and void due to a violation of the mandatory law, etc. as long as the registration, etc. was made pursuant to the title trust agreement, the application of the main text of the instant legal provision is not excluded solely on the ground that the registration, etc. made in the name of a third party

Supreme Court Decision 85Nu313 Decided July 23, 1985, which was invoked by the court below, is related to the issue under Article 32-2 (1) of the former Inheritance Tax Act before it was amended by Act No. 4283 on December 31, 1990, and thus it is not appropriate to invoke this case.

(2) Meanwhile, in light of the legislative intent of the instant legal provision, if the title trust was deemed to have been made for reasons other than the purpose of tax avoidance, and it is merely a minor reduction of tax incidental to the said title trust, it cannot be readily concluded that there was “tax avoidance purpose” in such title trust. However, since only when the purpose of tax avoidance is not included in the title trust, it cannot be deemed that there was a constructive gift by applying the proviso of the said provision, the other main purpose and it cannot be deemed that there was an intent of tax avoidance. In addition, the burden of proving that there was no purpose of tax avoidance is against the person who asserts it (see Supreme Court Decision 2007Du19331, Apr. 9, 2009, etc.).

However, according to the facts duly admitted by the court below, the plaintiff company transferred the treasury stocks of this case which it acquired in the name of the original institutional investor in consideration of the problems such as the preservation of corporate tax arising from the transaction in the name of institutional investors, etc., and in this light, it is reasonable to deem that the plaintiff company intended to avoid the corporate tax burden that may arise when it sells the treasury stocks of this case under the real name conversion of the company's own stocks of this case to the name of the plaintiff company for the purpose of the title trust agreement with the personal shareholders of this case.

(3) Therefore, the judgment of the court below is erroneous in the misunderstanding of legal principles as to the constructive gift of title trust property and the purpose of tax avoidance, which affected the conclusion of the judgment. The ground of appeal pointing this out

2. As to the grounds of appeal by Defendant Guro Tax Office

The court below acknowledged the facts as stated in its reasoning after comprehensively taking account of the adopted evidence. On the premise that 8,000 shares of this case 300,030 shares issued by the plaintiff company directly in the head of the office, sales profits did not accrue, and in the case of 292,030 shares sold within the head of the office through the operation force of the non-party 2, etc., 2,865,006,430 shares out of the sales profits under the agreement between the plaintiff company and the non-party 2, etc. was not likely to accrue to the plaintiff company, the court below held that the notice of change in the income amount of this case was unlawful on the premise that the above sales profits would not accrue to the non-party 2, etc.

In light of the relevant legal principles and records, the above fact-finding and judgment of the court below are just, and there is no error in the misapprehension of legal principles as to the object of disposition of income

3. Conclusion

Therefore, among the judgment of the court below, the part concerning the notice of joint and several tax payment of each gift tax against the plaintiff peting corporation and the part concerning plaintiffs 2, 3, and 4 shall be revoked, and this part of the case shall be remanded to the Seoul High Court. The appeal by the defendant Kuro Tax Office is dismissed, and the costs of appeal by the above defendant shall be borne by the losing party. It is so decided as per

Justices Lee In-bok (Presiding Justice)