Revocation of Disposition Imposing Inheritance Tax

Since the farming inheritor does not inherit all the farmland which is the inherited property of farming, the farming inheritance deduction cannot be recognized, and since the farming inheritor did not live together for not less than 10 years retroactively from the date the inheritance commences, the farming inheritance deduction cannot be recognized.

Article 18 of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 11609, Jan. 1, 2013)

2016Guhap62840 Revocation of Disposition of Imposing inheritance tax

AA and 4 others

*The Director of the Tax Office

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 61,003,00 among the disposition of imposition of KRW 81,434,560 against the Plaintiffs on December 1, 2014 is revoked.

1. Details of the disposition;

A. On February 2, 2012, the Plaintiff’s spouse letter** (hereinafter referred to as “the deceased”) died on February 2, 2012. Plaintiff Y and the deceased’s children inherited the deceased’s property, and the Plaintiff Y inherited the deceased’s property. On August 23, 2012, the Plaintiffs reported inheritance tax by deducting the amount of KRW 299,352,000,000 (i.e., the return value of the living house, KRW 142,00,000,000 from the return value of the living house) from the inheritance deduction for the Defendant on August 23, 2012.

B. From September 22, 2014 to November 28, 2014, the Defendant conducted an inheritance tax investigation on the Deceased (hereinafter “instant investigation”). As a result, the Defendant confirmed that: (a) some of the following farmland possessed by the Deceased (hereinafter “each farmland of this case”) were inherited to a person other than farming inheritors as follows; (b) the requirements for farming inheritance deduction were not satisfied; and (c) Plaintiff SeoB did not live together with the Deceased and Dooooo 3* 3*, Dooooooo Dooo Dooo Doo 3*, land and ground housing (hereinafter “instant housing”) for at least ten years retroactively from the commencement date of inheritance; and (d) the requirements for inheritance deduction were not satisfied.

C. On December 1, 2014, the Defendant, as a joint and several tax obligor, determined and notified inheritance tax amounting to KRW 81,434,560 (including additional tax) as a joint and several taxpayer (hereinafter “each disposition of this case”), and thereafter, a certified copy of the above decision was served on the Plaintiffs on January 9, 2015.

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on March 30, 2015, but the Tax Tribunal dismissed the claim on November 17, 2015.

Facts without any dispute, Gap's 2 through 7, Eul's 1, 2, 3, and 5 (including virtual numbers), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) Article 16(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 24358, Feb. 15, 2013; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) stipulating the scope of the deduction for farming inheritance limits to cases where a farming heir succeeds to all the farmland that is the inherited property. This is de facto restriction that the deduction for farming inheritance is impossible. This is beyond the scope of delegation under Article 18(4) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter “former Inheritance Tax and Gift Tax Act”). The provision of the Enforcement Decree of the said Act is invalid as being contrary to the purport of the deduction for farming inheritance, and even if a farming heir succeeds to only a part of the farmland that is the inherited property,

2) From May 21, 2002, Plaintiff SeoB had resident registration at the domicile of Doo-si Council members for the education of their children, and actually began to reside in the instant house with the deceased. On February 11, 2008, after their children graduated, they moved to the instant house and resided together with the deceased’s resident registration address. The deceased and Plaintiff SeoB resided in the instant house for at least ten years retroactively from February 2, 2012, which was the commencement date of inheritance. Thus, the inheritance deduction should be recognized.

3) Therefore, the part of the Defendant’s dispositions against the Plaintiffs in each of the instant dispositions against the Plaintiffs on different premise (= KRW 81,434,560 KRW 356,152,00/475,436,90) is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Judgment on the assertion on the inheritance deduction for farming

Article 18 (2) 2 of the former Inheritance Tax and Gift Tax Act provides that the value of the property inherited within the limit of 500 million won shall be deducted from the taxable value of the inherited property in cases of inheritance for farming. Article 18 (4) provides that as the scope of inheritance for farming and other necessary matters are delegated by the Presidential Decree, the term "Succession to farming" under the above provision refers to the inheritance of all of the following property among the successors, where an ancestor engaged in farming, among the inherited property, is inherited to the heir. "The farmland under subparagraph 1 (a) of Article 2 of the Farmland Act is stipulated in subparagraph 1." The above provision does not provide that the heir who meets the requirements of the heir and the heir who does not belong to the above shall be jointly inherited farmland, or that the heir shall be entitled to the deduction according to the ratio of the farmland inherited to the heir among the inheritance for farming, and that the above provision does not stipulate that the proportion of the tax amount to be deducted for farming, which is part of the heir's property inherited to the heir, in light of the purport of the above provision that the tax deduction for farming shall not be jointly inherited to the heir's.

2) Determination on the assertion of inheritance deduction for living together house

Article 23-2(1) of the former Inheritance Tax and Gift Tax Act provides that the amount equivalent to 40/100 of the value of the inherited house (including the value of land attached to the house) shall be deducted from the taxable value of the inherited house if the decedent and the heir live together in one house for at least ten years retroactively from the date of commencing the inheritance, in cases where inheritance commences due to the death of the resident. However, the Plaintiffs asserted that the inheritance deduction should apply to the Plaintiff’s live in the instant house from May 21, 2002 to February 2, 2012, since the Plaintiff and SeoB resided in the instant house from May 21, 2002, along with the deceased, from May 21, 2002 to February 2, 2012. Therefore, even according to the Plaintiffs’ assertion itself, it is apparent that the deceased and SeoB were not living in the instant house for at least ten years retroactively from the date of commencing the inheritance. Accordingly, Plaintiff SeoB failed to meet the living requirements of the Plaintiffs.

3. Conclusion

Therefore, all of the plaintiffs' claims are dismissed. It is so decided as per Disposition.