early 209west2738 ( November 23, 2009)

The provision of security shall be revoked in its entirety because it has been granted credit for monetary loans, but it falls under the donation, but there is no data to calculate the value of donated property.

If the father has provided that he/she may obtain a loan as security for his/her term deposit, he/she shall use the security value of the term deposit by allowing his/her father to use it for a certain period, and constitutes a donation of profits from the provision of services, but the disposition of imposition shall be revoked in its entirety because there is no data to calculate the value of donated property.

The contents of the decision shall be the same as attached.

Article 2(3) of the Inheritance Tax and Gift Tax Act;

Article 31(1) of the Inheritance Tax and Gift Tax Act

1. The imposition of each gift tax on March 3, 2009 by the Defendant against the Plaintiff is revoked.

2. The litigation costs shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. As between October 7, 2004 and December 8, 2005, the Plaintiff borrowed a total of 4 billion won from AA bank over 14 occasions (hereinafter “each of the loans of this case”).

B. The Plaintiff’s father ChoB provided each of the above loans to AAB as security to the bank in the amount equal to or similar to each of the above loans among the term deposits against the bank itself, and the total amount of the security offered is KRW 4 billion (hereinafter the “term deposit” in this case).

C. The director of the Central Regional Tax Office determined that the Plaintiff was actually donated the interest equivalent to the interest due to the act of providing the instant term deposit by ChoB, and calculated the amount as KRW 155,961,430 according to the following calculation method, and notified the Defendant thereof.

D. The Defendant deemed the above KRW 155,961,430 as the value of donated property to the Plaintiff by ChoB, and rendered each of the instant dispositions on March 3, 2009, on which gift tax was imposed on the Plaintiff in total for the year 2004 and the year 2005, as indicated in the attached disposition list.

E. The Plaintiff filed an appeal with the Director of the Tax Tribunal on June 2, 2009, against each of the instant dispositions, but was dismissed on November 23, 2009.

Facts that there is no dispute over the basis of recognition, Gap evidence 1, Gap evidence 3-1 through 13, Eul evidence 1 through 4, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

Comprehensively taking account of the following circumstances, each of the dispositions of this case is unlawful.

1) As to the act of offering the instant term deposit as security (hereinafter “instant term deposit”)

With respect to evaluation

A) Article 42(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “Inheritance Tax and Gift Tax Act”) provides that “B may obtain a loan from the Plaintiff by the act of offering the instant security, without any economic disadvantage, and the Plaintiff has maintained the original.” The Plaintiff paid a reasonable price for each of the instant loans, and there is no economic benefit accrued no economic benefit from the instant secured loan.”

By dividing the "profit from the provision of services without compensation" under subparagraph 2, the "donation" under Article 2 (3) of the Inheritance Tax and Gift Tax Act cannot be regarded as having been made.

B) Even if not, the act of ChoB’s offering of the instant security and the Plaintiff’s lending of each of the instant loans are separate acts, and such offering of security is not deemed as allocating profits by lending funds at a remarkably low interest rate to the Plaintiff.

2) As to the evaluation of the benefits of donation

The profit received by the Plaintiff does not gratuitously lend funds, but is the credit granted as security for the term deposit of this case, which is the amount equivalent to the expenses to be paid when the Plaintiff receives a security in lieu of the term deposit of this case from an unspecified person (credit guarantee company) who runs the business of providing credit to many and unspecified persons in the market.

3) As to donee by the act of offering security in this case

The Plaintiff is a shareholder of DD, and the Plaintiff was a new corporation that was given a loan of each of the instant loans to DD, which was difficult to obtain a loan from the bank, and lent this loan to DD, and thereafter, the Plaintiff repaid all the principal and interest to DD with repayment from DD. Since the person who gained a benefit by the act of offering security in this case is not the Plaintiff but DD that actually borrowed each of the instant loans and used them, the disposition based on which the donee is the Plaintiff is in violation of the principle of substantial taxation.

B. Relevant statutes

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

C. Determination

1) Determination on the third argument

In full view of Gap evidence No. 1 and Eul evidence No. 2, each of the loans of this case is acknowledged that the plaintiff received the loan of this case in order to lend each of the loans of this case to DD, and even if the plaintiff actually offered it to DD, the obligation and benefits of each of the loans of this case are reverted to the plaintiff, and the plaintiff again lent them to DD is based on a separate contract between the plaintiff and DD company. Thus, it cannot be deemed that DD actually received each of the loans of this case on the grounds of the purpose of the loan or the details of the use of the loan. The plaintiff's assertion on a different premise is without merit.

2) Determination on the first argument

A) As seen above, the ChoB provided a term deposit as security and received each of the instant loans from the Plaintiff. Although the existing property of ChoB is not directly transferred to the Plaintiff through such series of acts, the term “donation” subject to gift tax means a free transfer of tangible and intangible property, regardless of the name, form, purpose, etc. of such act or transaction, or an increase in the value of another person’s property by means of direct or indirect means (Article 2(3) of the Inheritance Tax and Gift Tax Act). (2) The term “gift property” includes all things belonging to the donee with economic value convertible into money, and all de facto or de facto rights with property value (Article 31(1) of the Inheritance Tax and Gift Tax Act). (3) Where the Plaintiff obtains profits from the provision of services (limited to those of which ordinary payment cost between many and unspecified persons is at least 10,000,000 won, which is subject to gift tax (Article 42(1)2 of the Inheritance Tax and Gift Tax Act).

B) However, considering the following circumstances, the act of offering collateral of this case is a service providing credit to the Plaintiff by the ChoB, and it is distinguishable from the act of withdrawing the amount equivalent to the above loan or lending it to the Plaintiff under its own name (see, e.g., Supreme Court Decision 2006Du19037, Apr. 23, 2009). Since the act of offering collateral of this case does not constitute “an act of unreasonably reducing the inheritance tax or gift tax by indirect method via a third party or by means of two or more acts or transactions” under Article 2(4) of the Inheritance Tax and Gift Tax Act, the act of offering collateral of this case does not constitute “an act of unreasonably reducing the inheritance tax or gift tax by means of an indirect method through a third party or by means of two or more acts or transactions.” Accordingly, the disposition of this case, which was made by calculating the value of donated property relating to the act of offering collateral of this case by lending funds to the Plaintiff at a remarkably low interest rate, may not be imposed gift tax. Accordingly, the Plaintiff

① In the instant act of offering collateral, the obligee is the bank, and the obligor is the Plaintiff. As such, the act of ChoB’s direct lending of money to the Plaintiff does not coincide with the scope of interested parties and the ownership of rights and obligations.

(2) The provision of money as security by deposit and the lending of the amount equivalent to the relevant term deposit itself is different from the legal form of the claim for payment of the relevant money and the claim for payment of interest and the attribution of the relevant bonds and obligations, and in the latter case, it is not the provision of the relevant money itself but the use of only the corresponding security value to others, and is also the economic substance.

(3) In granting credit for a money loan as above, the value of the other party's profits to receive is not uniformly determined. In the absence of such credit grant, it is difficult to evaluate that the other party's profits to receive by directly lending money is equal to the value of the other party's profits where the other party directly lending money is made according to various loan conditions, such as the interest on loans and the upper limit of loans, which are applied to the other party in the absence of such credit grant, and the amount of funds actually determined by the other party between the financial institution and the financial institution, repayment period and method, etc. In addition, the value of the profits that the other party would receive by directly lending money is calculated according to the appropriate interest rate, regardless of credit rating, etc. of the other party's credit rating under Article 41-4 of the Inheritance Tax and Gift Tax Act and Article 31-7 of the Enforcement Decree of the same Act. No such legal fiction exists in calculating the value of the property donated to the credit grant.

④ In order for the Plaintiff to unfairly reduce gift tax, if there are special circumstances to deem that the Plaintiff was taking the transaction form such as the act of providing the instant loan while lending the amount corresponding to the instant loan to the Plaintiff, then the transaction may be reconstructed by applying Article 2(4) of the Inheritance Tax and Gift Tax Act. Whether such special circumstances exist shall be determined by comprehensively taking account of the following circumstances: (i) the circumstance and time when the offerer became to provide the relevant term deposit; (ii) the financial resources of the relevant term deposit; (iii) the availability of funds other than the term deposit; (iv) the return and risk thereof; (iv) the details of disposal of term deposits after the period of providing the security; (v) the amount of gift tax increased in direct lending of the amount of the loan; (v) the personal relationship between the surety and the borrower; (v) the transaction history; (v) the debtor’s property or income; and (v) the details of the loan repayment; and (v) the data submitted with respect to the instant case alone is insufficient to recognize that there are such special circumstances.

The economic rationality of the act of directly lending a term deposit by withdrawing a term deposit and providing a term deposit as security without directly lending it may arise, but it may be more reasonable to directly lending a term deposit according to the deposit period or the mid-term cancellation fee, the fund operation plan, etc. of the term deposit in question. Even if there is no reasonable mind, from the standpoint of the offerer, the act of offering a term deposit as security for his family members or relatives is more safe than the act of withdrawing a term deposit and lending it. The act of offering a term deposit as security for his own family members or relatives differs in the possibility of selecting the alternative, but it is difficult to view that the act of offering a term deposit as security has the substance of the transaction itself, in light of the following: (a) the act of offering a term deposit as security for the family members or relatives of the guarantor; (b) there is no difference in the possibility of selecting the direct lending; (c) there is no difference in the substance of the other form of guarantee, such as the joint and several surety or the real collateral security; and (d) the act of offering a term deposit is practically rare.

(b) The Sub-Section B held large amount of funds in the form of a fixed deposit in the GG bank, HH bank, AA bank, JJ bank, KJ bank, and MMF not only at the time of the instant act of offering the security, but also at the time before and after the instant act of offering the security, and there seems to be any circumstance to deem that AA bank was unfavorable in terms of the terms of a fixed deposit, such as the low interest rate on a deposit compared to other banks, etc. Therefore, it is difficult to view CB as having committed a fixed deposit in the AA bank solely

3) Determination on the second argument and the scope of revocation of the instant disposition

In a lawsuit for revocation of taxation, the legality of the disposition shall be determined depending on whether it exceeds the legitimate tax amount, and it shall be examined whether the tax amount to be imposed lawfully on the Plaintiff regarding the act of providing the security in this case can be calculated.

As seen earlier, the benefits offered by ChoB to the Plaintiff through the act of offering the instant collateral is a kind of service providing the Plaintiff with a collateral for each of the instant loans. The act of offering the instant collateral cannot be deemed as the act of the ChoB lending the amount equivalent to the above loans to the Plaintiff. As such, the determination of the value of donated property concerning the benefits received by the Plaintiff cannot be made by applying Article 41-4(1)2 of the Inheritance Tax and Gift Tax Act to the Plaintiff’s profits from the free lending of money, such as the Defendant’s assertion, which can not be determined by the method of deducting the amount equivalent to the interest actually borne by the Plaintiff from the gains accrued from the loan of money to the Plaintiff. In addition, the act of offering the instant collateral cannot be deemed as constituting a donation interest rate under Articles 33 through 41, 41-3 through 41-5, 44, and 45 of the Inheritance Tax and Gift Tax Act, and in determining the market value of the loans provided by the Plaintiff’s employees under Article 42(1)2 and (2)1)9 of the Enforcement Decree of the Inheritance Tax Act.

The plaintiff asserts that the employee's credit guarantee for the employee's credit guarantee for the company or the financial institution, or that the employee can evaluate the donation profits based on 0.124% per annum or 0.75% per annum, which is the basic rate of credit guarantee insurance commission applicable to the loan issued by the Seoul Guarantee Insurance Co., Ltd., in order to obtain a loan from the company or the financial institution. The Seoul Guarantee Insurance's guarantee insurance is similar to the act of providing credit for the loan in this case, but it is similar to the act of providing credit for the employee's credit guarantee or the employee's small loans from the company or the financial institution, in light of the size, upper limit, operating method, and the nature of such credit guarantee, etc., there is a significant difference from the act of offering credit in this case. Accordingly, the amount calculated by multiplying each of the loans in this case by the premium rate of Seoul Guarantee Insurance cannot be recognized as the market price

In addition, it is difficult to find data to calculate the value of donated property related to the act of providing collateral of this case, such as the market price of the case of offering collateral of this case and the return on transactions of offering similar collateral, which can be seen as similar to all the circumstances, even through all the data submitted on this case. In such a case, the court cannot calculate the amount of legitimate tax to be lawfully imposed on the act of offering collateral of this case. In such a case, the court actively finds ex officio the method of calculating donated property, such as the market price of the service similar to the act of offering collateral of this case or the return on the service similar to the act of offering collateral of this case, and does not have an obligation to calculate the amount of legitimate tax (see Supreme Court Decision 94Nu13257, Apr. 28, 195)

3. Conclusion

The plaintiff's claim shall be accepted with due reason.