[1] In a case where shares are purchased under another person's name and only the customers account book of a securities company or the depositors account book of a substitute settlement company, whether the change of ownership of shares as required by Article 41-2 (1) of the former Inheritance Tax and Gift Tax

[2] In a case where a title trustee returned the sale price of the shares held in title trust to a title truster, whether such sale can be deemed as “return of donated property” under Article 31(4) of the former Inheritance Tax and Gift Tax Act (negative)

[1] Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of December 18, 2002) (see current Article 45-2 (1)), Article 174-3 (1) and (2), and Article 174-8 (1) and (2) of the Securities and Exchange Act / [2] Articles 31 (4) and 41-2 (1) (see current Article 45-2 (1)) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of December 18, 202)

[1] Supreme Court Decision 91Nu3833 delivered on December 24, 1991 (Gong1992, 714) Supreme Court Decision 93Nu3103 delivered on April 27, 1993 (Gong1993Ha, 1615) Supreme Court Decision 93Nu14196 delivered on February 22, 1994 (Gong194Sang, 1125) Supreme Court Decision 2003Du13762 Delivered on February 27, 2004

Plaintiff (Attorney Kim Jong-sik, Counsel for plaintiff-appellant)

The Director of the Pacific District Office

Seoul High Court Decision 2004Nu19752 Delivered on July 20, 2005

Each appeal is dismissed. The costs of appeal are assessed against each party.

The grounds of appeal are examined.

1. Judgment on the Defendant’s grounds of appeal

The transfer of registered shares cannot be effective against the company unless the name and address of the acquisitor are entered in the register of shareholders (including the list of actual shareholders under Article 174-8 of the Securities and Exchange Act). Thus, the real owner and the nominal owner are different in property requiring a transfer of ownership at the time of transfer or exercise of the right which is a requirement for deemed donation under the Act which is not the actual owner of shares. (See Supreme Court Decisions 93Nu14196, Feb. 22, 1994; 2003Du13762, Feb. 27, 2004; 2003Du13762, Feb. 17, 2004; 174-3(2) cannot be deemed as a provision for regulating relations with the customer securities company or the issuing company of the securities company. Thus, the transfer of shares cannot be deemed as effective only in the case of a transfer of ownership under the name of the securities company or the trading account book of the securities company. (See Article 174-8(1) of the former Securities and Exchange Act.

In the same purport, the court below recognized the fact that the plaintiff was stated in the customer account book of a securities company as the owner with respect to all of the shares of this case acquired in the name of the plaintiff, but recognized the fact that the transfer was made in the name of the plaintiff on December 31, 2000 only with respect to 14,658 shares in theoretical teck and 97,546 shares in the construction teck stock of a stock company among them, and determined that the provision on constructive gift of title trust shares applies to the above transferred shares only to the above transferred shares, and there is no error in the misapprehension of legal principles as to the nominal trust

2. Judgment on the Plaintiff’s grounds of appeal

The court below held that the Plaintiff’s property deemed donated pursuant to Article 41-2(1) of the former Act is the title trust shares of this case, not the purchase price of the title trust shares, and that the title trustee’s disposal of the title trust property and returning the price to the title truster is naturally expected in the title trust for the purpose of tax avoidance. However, if the title trustee construed that gift tax cannot be imposed by deeming that the disposal price of the title trust property or the return of the property donated to the title truster is the return of the property donated to the title truster, the act of title trust would be deemed a gift and thus, the purport of the law to restrain the title trust for the purpose of tax avoidance would disappear by deeming the act of title trust as a gift. Thus, the Plaintiff’s return of the sale price of the title trust shares of this case cannot be deemed as “return of the donated property” under Article 31(4) of the former Act. In light of related statutes and the records, the judgment of the court below is justifiable and there is no

3. Conclusion

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

Justices Shin Hyun-chul (Presiding Justice)