[1] The scope of taxes under the proviso of Article 32-2 (1) of the former Inheritance Tax Act

[2] The case reversing the court below's decision on the ground of incomplete hearing as to whether the purpose of tax avoidance exists in the title trust of shares

[1] The legislative intent of Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) is to effectively prevent the act of tax avoidance using the title trust system and realize the tax justice, and thus, an exception to the substance over form principle is acknowledged. Therefore, in a case where the purpose of the title trust is to avoid tax, if the purpose of the title trust is to avoid tax, it shall not be limited to the gift tax without any express basis as stipulated

[2] The case reversing the judgment of the court below on the ground that the court below erred by misapprehending the legal principles as to the constructive gift of Article 32-2 (1) of the former Inheritance Tax Act, and failing to exhaust all necessary deliberations, which affected the conclusion of the judgment, on the ground that the above nominal trust did not intend to avoid taxes other than gift tax, but did not intend to avoid gift tax on shares, and on the ground that there was

[1] Article 32-2 (1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) / [2] Article 32-2 (1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993)

[1] Supreme Court Decision 94Nu11729 delivered on November 14, 1995 (Gong1996Sang, 95) Supreme Court Decision 95Nu7024 delivered on December 5, 1995 (Gong1996Sang, 1617), Supreme Court Decision 95Nu1355 delivered on April 12, 1996 (Gong196Sang, 1617), Supreme Court Decision 95Nu13555 delivered on April 12, 1996 (Gong196Sang, 1617), Supreme Court Decision 95Nu1068 delivered on May 10, 1996 (Gong196Ha, 1918)

Plaintiff (Attorney Kim Chang-soo et al., Counsel for the plaintiff-appellant)

Head of Ansan Tax Office

Seoul High Court Decision 94Gu19978 delivered on July 6, 1995

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

We examine the grounds of appeal.

According to the reasoning of the judgment below, the court below revoked the disposition imposing the gift tax of this case on the ground that the non-party, the founder of the non-party corporation, entrusted the Plaintiff with the ownership of 9,000 shares at the time of the capital increase on February 3, 1991, in order to avoid the limitation under the Commercial Act demanding not less than seven promoters for the establishment of the non-party corporation and the compulsory execution due to a large amount of joint and several liability borne by the above non-party.

However, the legislative intent of Article 32-2(1) of the Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990; Act No. 4662, Dec. 31, 1993; Act No. 4662, Apr. 12, 1996) is to recognize exceptions to the substance over form principle in the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, where the purpose of the title trust is to avoid tax, if the purpose of the title trust is to avoid tax, it shall not be limited to the gift tax without any express basis (see, e.g., Supreme Court Decisions 94Nu11729, Nov. 14, 1995; 95Nu7024, Dec. 5, 1995; 95Nu1355, Apr. 12, 1996).

Therefore, the court below should also examine and determine whether the above non-party had an intention to avoid taxes other than gift tax in the title trust of the shares of this case to the plaintiff, and further, the court below's decision that the above provision on deemed donation does not apply to the above title trust since there is no purpose to avoid gift tax on the above shares. Thus, the court below erred by misapprehending the legal principles on deemed donation and by failing to exhaust all necessary deliberations, which affected the conclusion of the judgment.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Ahn Yong-sik (Presiding Justice)