National Tax Service Review Donation 2011-0061 ( November 11, 2011)

Any profit to be exempted from the obligation by repaying the obligation instead of the obligation shall be deemed to be a donation.

Even though children are still liable as a surety's obligation by providing as a security for the obligation of loans, it is reasonable to deem that the father has given a donation equivalent to the amount of the obligation as the principal obligor of the obligation, inasmuch as the father has gained a benefit of exempting the obligation by repaying the obligation instead of the obligation.

2011Guhap16255 Revocation of Disposition of Imposition of Gift Tax

KimA

Head of Si Tax Office

July 6, 2012

July 20, 2012

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposition of gift tax of KRW 000 against the Plaintiff on June 18, 2012, which exceeds KRW 000, shall be revoked.

1. Details of the disposition;

A. On October 27, 2009, the Plaintiff entered into a sales contract with Suwon-si O200, approximately 481.6m2 (hereinafter “instant land”) with the KimB on the purchase price of KRW 000,00,000 and KRW 481.6m2 (hereinafter “the instant land”). On November 17, 2009, the Plaintiff paid the purchase price of the instant land by borrowing KRW 000 from AAA agricultural cooperative (hereinafter “instant obligation”), and KimB established the instant collateral security (hereinafter “instant donation”). On December 29, 2009, the Plaintiff paid the remainder after receiving a donation from the father (the father) KimD, and completed the registration of ownership transfer.

B. On July 29, 2010, KimD newly constructed a building for accommodation of the first and seventh floor above the ground (hereinafter “instant building”) on the instant land, and completed registration of ownership preservation in its name. KimD borrowed KRW 2.1 billion from a A bank on September 20, 2010, and the Plaintiff and KimD offered the instant land and the instant building as joint collateral to AA bank. KimD, out of the above loans 2.1 billion won, repaid the Plaintiff’s debt to AA agricultural cooperative, and the instant collateral security was cancelled on September 17, 2010 immediately before the instant debt was repaid.

C. The Defendant: (a) deemed that the Plaintiff donated the entire amount of KRW 000 (the instant debt KRW 000 + the instant donation amount of KRW 000) to KimD; and (b) imposed and notified the Plaintiff of KRW 000 on August 10, 201 (hereinafter “previous disposition”).

D. The Plaintiff dissatisfied with the instant previous disposition and filed a request for examination with the Commissioner of the National Tax Service on August 19, 201, but was dismissed on November 11, 201.

E. The Defendant, and the instant lawsuit seeking revocation of the previous disposition, pending on June 2012.

18. Of the acquisition funds of the instant land, with respect to KRW 000, which KimD donated to the Plaintiff, KRW 000, and with respect to the repayment by KimD on behalf of the Plaintiff, KRW 000,000, a total amount of gift tax was adjusted, such as correction of KRW 00, and notified the Plaintiff on June 25, 2012 (hereinafter “instant disposition”).

[Ground of Recognition] The non-contentious facts, Gap evidence 1 to 4, Eul evidence 9, and Eul evidence 1 to 5, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Although KimD repaid the Plaintiff’s instant debt, and GimD repaid the instant debt with the amount of money borrowed by providing the Plaintiff’s instant land, etc. as collateral. Therefore, insofar as the instant land owned by the Plaintiff is still provided as physical collateral, the Plaintiff did not have any substantial profit arising from the extinguishment of the instant debt, and the part on which gift tax was imposed by deeming the repayment of the instant debt as a gift among the instant disposition is unlawful (the Plaintiff did not dispute the part on KRW 00 of the amount of gift tax on the instant donation among the instant disposition).

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

The Plaintiff, as the principal obligor of the instant obligation, was obligated to repay the instant obligation, and the Plaintiff came to benefit from exempting the Plaintiff from the obligation by repaying the instant obligation instead of the instant obligation. Therefore, it is reasonable to deem that KimD donated the amount equivalent to the amount of the instant obligation to the Plaintiff by repaying the Plaintiff’s obligation instead of the instant obligation. Furthermore, even if the Plaintiff still becomes liable as a surety by offering the instant land as collateral to KimD’s loan free, if the Plaintiff, who was the person who established the instant right of interest, was to obtain the right to indemnity against the instant land if the Plaintiff, as the principal obligor of the instant obligation, was to repay the instant land, or lose its ownership due to the enforcement of the right to collateral security (Articles 370 and 341 of the Civil Act), and it is not acceptable to accept the Plaintiff’s assertion. Accordingly, it is not acceptable to accept the Plaintiff’s assertion.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed, and it is so decided as per Disposition.