[1] Whether the limit of the amount of tax payable that can be claimed for payment in kind under Article 73(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act is stipulated as "the amount of tax payable for the value of real estate and securities which are the inherited property" without delegation by the mother law or null and void beyond the scope of

[2] Meaning of Article 73(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act “if no value is available to pay the amount of tax payable under paragraph (1) of the real estate and securities which are inherited property,” and whether payment in kind may be permitted in excess of the limit provided under Article 73(2) of the Enforcement Decree only when the requirements provided under Article 73(2) of the said Enforcement Decree are met (affirmative in principle)

[3] Whether non-listed stocks eligible for payment in kind per share constitutes “when there is no value suitable for paying the tax amount under Article 73(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act” (negative in principle)

[1] The main text of Article 73(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007) provides that the value of real estate and securities among inherited property shall exceed 1/2 of the value of inherited property as the requirement of payment in kind shall be limited to real estate and securities. However, the limit of the amount of payment in kind is not specified. However, the legal system of payment in kind is recognized as an exception to the principle of cash payment (see Article 18 of the Enforcement Decree of the National Tax Collection Act). In light of the fact that the legal provision of this case limits the scope of property permitted in kind to be paid in real estate and securities, it is difficult to deem that the purport of the provision of this case is to allow payment in kind of real estate and securities. In addition, even if the legal provision of this case is interpreted, it cannot be deemed that the scope of payment in kind goes against the purpose of Article 7(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act that allows payment in kind to be made in accordance with the foregoing provision of Article 7(3).

[2] The purpose of Article 73(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “Enforcement Decree”) is to prevent the payment in kind of inherited property which is allowed to be paid in kind, but it is not possible to divide it in accordance with the amount of tax that can be demanded to pay in kind under Article 73(1) of the same Enforcement Decree, and thus, it also prevents the payment in kind. Thus, the term “where there is no value suitable for the payment in kind of the amount of tax in real estate and securities which are inherited property” under the above provision refers to cases where the amount of the property to be paid in kind exceeds the “amount of inheritance tax on the real estate and securities which are inherited property” under Article 73(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is the limit of the amount of tax payable to be paid in kind. Moreover, the payment in kind system is separate from the payment in kind under Article 71(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007). 701).

[3] The purpose and text of Article 73(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “Enforcement Decree”), along with the purport and text of Article 73(2) of the same Enforcement Decree, is recognized as an exception to the principle of cash payment of taxes, and therefore it is desirable to determine the allowable scope of payment in kind in consideration of the equity in tax burden and the balance in tax collection between the payer of the tax and the person who intends to pay in kind. In light of the above, unlisted stocks eligible to pay in kind per share can be paid in kind by paying in kind a quantity equivalent to the amount of tax payable for the value of real estate and securities, and barring any special circumstance, it cannot be deemed that “if there is no value suitable for paying the amount of tax payable for the portion of non-listed stocks which are inherited property” under Article 73(2) of the Enforcement Decree of the same Decree, barring any special circumstance, it cannot be deemed that the economic value of the remaining portion may not be maintained at

[1] Article 73(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of December 31, 2007); Article 73(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act / [2] Article 73(1) and (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act / [3] Article 73(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

Plaintiff (Attorney Son Ji-yol et al., Counsel for the plaintiff-appellant)

The director of the Gwangju Tax Office (Law Firm LLC, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Gwangju High Court Decision 2010Nu589 decided August 26, 2010

The judgment below is reversed, and the case is remanded to the Gwangju High Court.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Article 73(1) main text of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “the Act”) provides that “In case the value of real estate and securities among inherited property exceeds 1/2 of the value of the relevant property and the amount of inheritance tax payable exceeds 10,000 won, the head of the tax office having jurisdiction over the place of tax payment may allow payment in kind only for the relevant real estate and securities upon request of a taxpayer under the conditions as prescribed by the Presidential Decree.” Article 73(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “Enforcement Decree”) provides that “The amount of tax payable that may be requested to pay in kind pursuant to Article 73 of the Act shall not exceed the amount of inheritance tax paid on the value of real estate and securities that are the relevant inherited property.”

Article 73(1) of the Enforcement Decree of the Act provides that the value of real estate and securities among inherited property shall exceed 1/2 of the value of inherited property shall be limited to real estate and securities. However, the limit of the amount of tax payable is not specified. However, in light of the legal provisions of this case limited to real estate and securities, the scope of property the payment in kind is permitted to be made in accordance with the principle of cash payment (see Article 18 of the Enforcement Decree of the National Tax Collection Act) and the legal provisions of this case limited to real estate and securities, it is difficult to deem that the purpose of the legal provisions of this case is to allow the payment in kind of inheritance tax to be made in whole. Furthermore, even according to its language and text, the legal provisions of this case are deemed to have delegated not only the method and procedure of applying for payment in kind, but also the matters concerning permission for payment in kind to be delegated to the Enforcement Decree. Thus, the limit of the amount of tax payable by a taxpayer in kind is based on delegation of the legal provisions of this case.

Nevertheless, the court below held that the legal provision of this case does not delegate to the Enforcement Decree the limit of the amount of tax payable to limit the limit of the amount of tax payable to be paid in kind under Article 73 (1) of the Enforcement Decree, but it is against the purport of the legal provision of this case, and thus null and void since it goes beyond the scope of delegation. In this case, the court below erred by misapprehending the legal principles on the limit of delegation legislation, which affected the conclusion of the judgment. The ground of appeal pointing this out is with merit.

2. As to grounds of appeal Nos. 2, 3, and 4

A. Article 73(2) of the Enforcement Decree provides that “Where there is no value suitable for the payment of the tax amount under paragraph (1) of this Article among real estate and securities which are inherited property, the head of a tax office may permit the payment in kind with respect to the tax amount in excess of the relevant tax amount, notwithstanding the provisions of paragraph (1).”

B. After finding facts as indicated in its reasoning based on the evidence adopted, the court below acknowledged that even though Article 73(1) of the Enforcement Decree is not null and void, the above provision is premised on the possibility of paying the remaining inheritance tax for which payment in kind is not allowed with inherited property other than inherited property allowed to be paid in kind. Since Article 73(2) of the Enforcement Decree aims to reduce taxpayer's difficulties due to unreasonable realization of inherited property allowed to be paid in kind, in cases where inherited property other than inherited property allowed to be paid in kind is considerably difficult and it is difficult to find ways to pay in full with inheritance tax due to the realization of inherited property allowed to be paid in kind, it shall be deemed that payment in kind without restriction under Article 73(1) of the Enforcement Decree. All real estate except the land on five lots permitted to pay in kind by the defendant among inherited property of this case can be seen as being paid in kind without being limited under Article 73(1) of the Enforcement Decree. In light of the above, it is difficult for the plaintiff and co-inheritors to find out the remaining method of payment in kind with the non-listed property of this case.

Furthermore, the court below held that Article 73 (2) of the Enforcement Decree should be applied in consideration of not only whether the inherited property subject to payment in kind can be physically divided but also whether the corporate property subject to payment in kind can be divided and whether the economic value of the divided portion is maintained in proportion to the ratio of division in case of the corporate property subject to payment in kind, as alleged by the defendant, although the inherited property subject to payment in kind is allowed to be paid in kind as provided by Article 73 (2) of the Enforcement Decree, due to the circumstance such as the restriction on division, etc., it is necessary to properly reflect the value of the shares in case of a corporate property subject to payment in kind, which is limited to the building for lease in kind, since it is general and limited to the building for lease in this case, it is not subject to the restriction on tax payment in kind as provided by Article 73 (1) of the Enforcement Decree.

C. However, it is difficult to accept the judgment of the court below for the following reasons.

First, the purport of Article 73(2) of the Enforcement Decree is to prevent the payment in kind, even if inherited property is allowed to be paid in kind, but it is impossible to divide it in accordance with the payable tax amount that can be demanded to pay in kind under Article 73(1) of the Enforcement Decree. Thus, the phrase “if there is no value equivalent to the payment in kind of the payable tax amount under Article 73(1) of the Enforcement Decree of the Real Estate and Securities Which are inherited Property” under the above provision means the case where the received value of the property to be paid in kind exceeds “the inheritance tax amount on the real estate and securities which are inherited property” under Article 73(1) of the Enforcement Decree, which is the limit of the payable tax amount that can be demanded to pay in kind. In addition, considering the fact that the tax payment in kind is an exception to the principle of cash payment in kind, and that the tax payment in kind is prepared separately from the payment in kind (see Article 71(2) of the Enforcement Decree), the head of a tax office does not permit the payment in kind to the Plaintiff and co-inheritors to pay in excess stocks.

Furthermore, along with the purport and text of Article 73(2) of the Enforcement Decree, the system of payment in kind is recognized as an exception to the principle of cash payment, and therefore it is desirable to set the permissible scope of payment in kind in consideration of the equity in tax burden and the loyalty in tax collection between the person who pays in kind and the person who intends to pay in kind. In light of the above, unlisted stocks eligible to pay in kind per share can be paid in kind by paying in kind a quantity equivalent to the amount of tax payable for the value of real estate and securities that are inherited property in question, and barring special circumstances, it cannot be deemed that “if there is no value suitable for paying the amount of tax payable under paragraph (1) of Article 73(2) of the Enforcement Decree” under Article 73(2) of the Enforcement Decree, barring any special circumstance, it cannot be deemed that “if payment in kind is permitted only for part of inherited property and securities that are inherited property

Nevertheless, the court below determined that the payment in kind should be permitted for the unlisted stocks of this case in excess of the limit under Article 73(1) of the Enforcement Decree. In so doing, the court below erred by misapprehending the legal principles on the scope of the amount of tax payable that can be claimed for payment in kind under Article 73(1) of the Enforcement Decree, etc., which affected the conclusion of the judgment, and the ground of appeal pointing this out

Meanwhile, according to the evidence duly admitted by the court below, pursuant to Article 73 (3) of the Enforcement Decree of the Act, the defendant was found to have disposed of this case by excluding the inheritance tax amount equivalent to the inheritance tax amount equivalent to the inherited property value changed to an asset which is inappropriate for management and disposition on collateral security, etc. established during the period from the commencement date of inheritance to the date of application for payment in kind without justifiable grounds, from the scope of permission for payment in kind. In addition, the court below did not make any specific determination on the illegal grounds of this part, and it also pointed out that the revocation of the entire disposition of this case including this part of this case was erroneous as otherwise alleged in the ground of appeal.

3. Conclusion

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 Park Poe-dae (Presiding Justice)