Seoul High Court 2014Nu57920 ( October 24, 2015)

Where the title trust shares are inherited, it may not be taxed with the provision on deemed donation of transfer of ownership.

If shares are inherited due to the death of a title truster after a title truster becomes a title truster due to a title trust and transfer of title in the future of the title trustee, it is not subject to the provision on deemed donation

Article 41-2 of the former Inheritance Tax and Gift Tax Act

Article 45-2 of the Inheritance Tax and Gift Tax Act

Supreme Court Decision 2015Du4046

Park ○ and one other

○ Head of Tax Office and seven others

Seoul High Court Decision 2014Nu57920 Decided March 24, 2015

April 13, 2017

All appeals are dismissed.

The costs of appeal are assessed against the Defendants.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

A. The main sentence of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act") provides that "where the actual owner and the nominal owner are different from each other in the property (excluding land and buildings; hereinafter the same shall apply in this Article), the value of the property shall be deemed to have been donated to the actual owner on the date when it is registered, etc. as the nominal owner (where the property requires a change of ownership, referring to the day following the end of the year following the year in which the date of acquisition of ownership falls), notwithstanding the provisions of Article 14 of the Framework Act on National Taxes, the value of the property shall be deemed to have been donated to the actual owner (hereinafter referred to as the " provision of this case"). The second main sentence of this case shall be presumed to have been reported under the name of another person, and the second main sentence shall not be presumed to have been reported under the provisions of Article 10 of the Income Tax Act.

In light of the language and structure of the provision of this case and the provision on deemed donation of transfer of a title holder, where a person who acquired stocks fails to change the title for a long time, the primary taxpayer of gift tax is the transferor in the position of the title trustee upon the application of the provision. However, the transferor of stocks can be deemed to have directly involved in the formation of appearance such as the title trust due to the neglect of transfer of a title holder. Furthermore, by reporting the tax base, etc. of capital gains tax or securities transaction tax pursuant to the proviso of Article 45-2(2) of the former Inheritance Tax and Gift Tax Act, the presumption of tax avoidance purpose can be reversed, and thus, can escape from the subject of deemed donation. On the other hand, if the transferred stocks are inherited, the existing title trustee is not only the subject of the provision on deemed donation of a title trust on the date of the initial transfer of title holder, but also does not constitute a new act to form legal relationship with the heir, and it is unreasonable to deem that the transfer of real estate is not subject to imposition of a title trustee’s gift tax for a certain period of time after the inheritance.

B. The court below acknowledged the following facts based on the adopted evidence.

1) Before the death of February 21, 2007, Park Jong-A, the plaintiffs' references, acquired and managed 000 shares of the shares of the BB industry corporation that he controlled and operated (hereinafter "the shares of this case") in the name of nine former and incumbent officers and employees, and other persons (hereinafter "the title trustee of this case").

2) On February 21, 2007, ParkB died, and the instant shares were succeeded to the heir (ChB, son KimB, Plaintiff Park Dong-CC, and Plaintiff Park Dong-D). Since then, KimB died on November 4, 201 when KimB managed the instant shares, the part of the instant shares inherited by KimB to the Plaintiffs, who were their children.

3) On February 21, 2007, before the first inheritance commenced on February 21, 2007 due to the death of ParkA, with respect to the title trust of the instant shares to the title trustee, the Defendants: (a) on the basis of the provision on deemed donation for title trust; (b) upon the application of the provision on deemed donation for title trust, the Defendants imposed gift tax on the title trustee of the instant case; and (c) upon the designation of ParkA or the Plaintiffs as a joint and several

4) Since February 21, 2007, the first inheritance date, the Defendants considered KimB, the inheritor, and the Plaintiffs’ acquisition date of the instant shares, and imposed another gift tax on the instant title trustee on the grounds that the instant title trustee did not transfer the title to the heir by December 31, 2008, which is the last day of the acquisition date, on the following day of the acquisition date. On the other hand, on February 13, 2013, the Defendants designated KimB and the Plaintiffs as joint and several taxpayers, and issued the instant disposition imposing and notifying gift tax of KRW 00 won in total.

C. The lower court, on the grounds indicated in its reasoning, determined that the instant disposition, which was imposed on the gift tax by applying the provision on the constructive gift of transfer of title to the instant shares, was unlawful on the ground that the instant shares already held in title by KimB and the Plaintiffs were acquired due to inheritance, and thus, the transfer of title to the instant shares was not made in the name of KimB and the Plaintiffs from the date of inheritance until the end of the next year.

D. Examining the records in light of the aforementioned provisions and legal principles, such determination by the lower court is justifiable, and contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the scope of application of the

2. Regarding ground of appeal No. 2

The allegation in the grounds of appeal purporting that the court below erred in the misapprehension of the duty to prove the absence of the purpose of tax avoidance as to the provision on constructive gift for transfer of a title holder. This part of the ground of appeal is against the judgment of the court below that the plaintiff's assertion that there was no objective of tax avoidance. As seen above, the court below's conclusion that the disposition of this case was unlawful since the plaintiffs' acquisition of the shares already trusted due to inheritance, and the transfer of ownership is not made by the last day of the next year cannot be deemed as being subject to the provision on constructive gift for transfer of a title holder, and therefore, the validity of the above constructive and preliminary determination is not affected by the judgment.

3. Conclusion

All appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.