Cho High Court Decision 2010west087 ( December 9, 2009)

title trust with the purpose of tax avoidance.

In light of the fact that the transfer income tax related to the transfer of stocks was not paid by tax authorities, the tax authorities did not discover or find it, and that the transfer income tax was returned and paid after the commencement of the investigation of source of the acquisition fund of stocks, etc., it is deemed that the title trust was made for the purpose of evading global income tax pursuant to the progressive tax rate

2010Guhap31867 Revocation of Disposition of Imposition of Gift Tax

XX

Head of Yeongdeungpo Tax Office

April 5, 2011

July 21, 201

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s imposition of gift tax of KRW 50,96,420 on October 1, 2009 against the Plaintiff on December 31, 2003 and KRW 840,686,320 on the gift tax of December 31, 200 and each disposition of KRW 840,686,320 on the gift tax of December 31, 2004 shall be revoked.

1. Details of the disposition;

A. The director of the Seoul Regional Tax Office shall conduct an investigation on the change of stocks against OO stock companies (hereinafter “OOO”) from March 21, 2008 to June 27, 2008 and conduct an investigation on the source of stock acquisition funds against the plaintiff.

As a result, it is found that the plaintiff's fraud established a borrowed name securities account in the name of the plaintiff in the name of the plaintiff and held the listed stocks as listed below such as OOOO that they acquired in the name of the plaintiff under the title of the plaintiff (hereinafter referred to as "the shares of this case") under the title trust of the plaintiff, and that the defendant was the defendant.

The taxation data was notified.

B. In accordance with Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act"), the Defendant deemed that the Plaintiff donated the instant stocks from CO, calculated the value of the deemed gift value of the instant stocks held in the said securities account as at the time of the transfer date as shown in the following table. On October 1, 2009, the Defendant imposed on the Plaintiff KRW 50,996,420 (the amount less than 10 won was reduced; hereinafter the same shall apply), gift tax of KRW 840,686,320 on the donation on December 31, 2004, respectively (hereinafter referred to as the "each of the instant dispositions").

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on December 9, 2009, but the Tax Tribunal dismissed the Plaintiff’s claim on May 6, 2010.

Facts that there is no dispute with recognition, Gap evidence 1-2, Gap evidence 2-2, Eul evidence 1-2, Eul evidence 2-2, Eul evidence 2;

Section 11. Each entry of evidence and the purport of the whole pleadings

2. Whether the disposition of this case is legitimate

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

1) The Plaintiff was recommended by the following: (a) from July 14, 2003 to July 16, 2004, the Plaintiff borrowed a total of KRW 2.52 billion from the tea to purchase the instant shares with the borrowed money; and (b) is only the actual owner who purchased the instant shares with the borrowed money; and (c) does not receive the title trust of the instant shares from the tea.

2) In addition, even if the teaO entrusted the Plaintiff with the title of ownership of the instant shares, the title trust of the instant shares was aimed at raising the Plaintiff’s old age fund with the profits from the stock transaction, and in the case of the transfer of the shares of OO in 2004 and 2005, the transfer income tax was imposed on the Plaintiff as well as the next OO in the case of the transfer of the shares of OOO in 2004 and 2005. The amount of global income tax on the dividend income of the shares avoided from the title trust did not have the tax avoidance purpose at the time

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) A tea is the wife of the president of KimO, who is the major shareholder of the OOO, and is the relative of the KimO and Article 20 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 22038, Feb. 18, 2010). A tea has worked for approximately twenty years at the OO group, such as OOO, and has been working as the vice president of the OO construction division from May 2004.

2) After having completed study with 190-years to middle schools, the Plaintiff married in 1967 and lived as the occupational master, who was the father of EO(OO) around 1990, and re-born with EO, the father of EO(OO).

3) On July 14, 2003, when visiting an OO central branch with the Plaintiff and opening an account for securities (O-O-O-OO) under the Plaintiff’s name. From the same date to July 16, 2004, 2.5 billion won was deposited in the said securities account for 14 times between the same date and July 16, 2004. The password of the said securities account is the same as the password of the securities account of O as seen below.

4) On September 4, 2003, an amount deposited in the said securities account purchased the instant shares on several occasions by February 17, 2005, including purchase of OOO shares on September 4, 2003. From June 1, 2004 to February 23, 2005, the instant shares were transferred several times, and the sum of the transfer proceeds is KRW 3,05,000,000.

5) From August 11, 2004, the details of the transfer of the balance of the deposit received in the said securities account are as follows. An MO or EO drafted both the withdrawal money table of the said securities account and the deposit transfer table to the account of the following OO bank.

① 2.50 million won is transferred to the bank account of nextO (2.9 billion won on August 11, 2004, KRW 650 million on September 9, 2004, KRW 150 million on November 3, 2004, KRW 82 billion on February 21, 2005, KRW 820 million on February 21, 2005).

② On March 11, 2005, the amount of KRW 500,000 has been withdrawn and deposited into an O branch account (the opening date: March 10, 2005; the account number:*******) in the name of the plaintiff.

③ The amount of KRW 36,469,890 in the balance of April 8, 2005 was withdrawn and deposited into an O branch account (the opening date: March 14, 2005; the account number:*******) in the name of the plaintiff.

6) The above KRW 500 million deposited in the Obank account (*****************************************************) deposited in the above Obank deposit account (****************)) was used as follows, and the above KRW 536,469,890 (3) deposited in the above Obank deposit account (*******) was used as follows. The above KRW 50 million transfer and all the following acts were committed by OO:

① The amount of KRW 200 million withdrawn on July 14, 2005 is paid for capital increase with OOOOO capital increase.

② On August 16, 2005, KRW 2200 million was withdrawn and deposited into a securities account in the name of OO Co., Ltd. in the name of OO, which is the plaintiff's ushel ancillary.

③ On July 5, 2005 and February 3, 2006, respectively, KRW 15 million has been deposited into the account of the next OO bank account (********) of the next OO.

④ On January 3, 2008, KRW 100 million is deposited into the account of the father of teaO in the account of the OO’s father.

7) On May 22, 2008, the Plaintiff was investigated by the Seoul Regional Tax Office on May 2, 2008, stated that this OO securities account was opened, entered and withdrawn, the source of funds deposited in the said securities account, trade issues, investment decisions, etc. were entrusted to EO and EO was not well-known, and EOO was also aware of and processed by EOO as the professional owner.

8) Three copies of a loan with the purport that the Plaintiff borrowed a total of KRW 2.52 billion from teas ( KRW 400 million on March 29, 2004, KRW 1 billion on April 29, 2004, KRW 1 billion on April 29, 2004, KRW 81,000 on July 16, 2004, KRW 81,000 on July 16, 2004).

Although the agreement was written at the rate of KRW 6% per annum, the Plaintiff stated that there was no fact that the Plaintiff paid interest for KRW 2.52 billion to the nextO at the time of the investigation.

9) With respect to KRW 100,000,00, which was transferred from the O bank account of the OO to the account of the OO bank account of the OO, the OO received money in the form of cash necessary for children to divide their properties in preparation for inheritance that is in the future due to the lack of body, and then in calculating the inheritance tax base, in order to be deducted from the inheritance liability (the receipt of a loan from the O on January 3, 2008 between the O and the OO was made). However, the OO stated that it does not actually borrow money from the O. Meanwhile, the 10th anniversary of the 10th anniversary of the OO and the 2006 did not receive money from the O.

10) An OOO is a lighting organization wholesale company established by the tea, and the main trading office after 2003 is an OO. On December 31, 2001, the shareholder's share ratio was 50% of the tea, 40% of the OO, 2000, 2000, 2000, 2000, 2000, 2000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,0000,000,000,000,000,000,000,000,00,000.

11) On June 1, 2009, the Plaintiff paid capital gains tax and resident tax 237,170,500 won related to the OO shares transferred in 2004 and 2005 and OO shares transferred in 2005.

12) 2003. 12. 31. 및 2004. 12. 31. 현재 원고와 차OO, 이OO, 이OO, 주식회사 OOOOOOO, 주식회사 OOOO 등은 OOOO 주식 100분의 3 이상을 소유하는 구 국세기본법 시행령 제20조에 의한 친족 기타 특수관계인으로서, 구 소득세법(2005. 12. 31. 법률 제7837호로 개정되기 전의 것) 제94조 제1항 제3호 ㈎목, 구 소득세법 시행령 (2009. 2. 4. 대통령령 제21301호로 개정되기 전의 것 및 2005. 8. 5. 대통령령 제

In accordance with Article 157 (4) 1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Act No. 18988), where any person acquires OO shares in whose name he/she owns in 2004 and 2005, he/she was subject to capital gains tax (other than this, OO is subject to capital gains tax due to his/her relationship under Article 20 of the former Enforcement Decree of the Framework Act on National Taxes with the president who is a major shareholder of OOO group).

13) Meanwhile, as for the Plaintiff, the Plaintiff opened an OO securities account in the name of the wife, and deposited money, and thereafter traded shares. The director of the tax office of the regional tax office deemed the OO securities account under the name of the OO as also the OO securities account under the said securities account and imposed gift tax on OO by deeming that the OO stocks, etc. acquired under the name of OO through the said securities account were donated from OO by applying the provisions of Article 45-2 of the former Inheritance Tax and Gift Tax Act. In addition, the said provision also applies to the shares acquired under the name of OO that the O was a subordinate employee of the past.

Therefore, the gift tax was imposed on the KimO as a donation from the carO, and the carO and KimO recognized that the securities account in the name of the above KimO was the tea account of the carO.

14) If it is deemed that the teaO held the title trust of shares with the Plaintiff and EO, the global income tax on the dividend income of the reduced shares is KRW 10,386,253 (the amount for which the global income tax progressive rate is not applicable).

Facts without any dispute, Gap 2 through 8, 15, 18, 26 through 28, Eul 3 through 8, 10, and 11 (including various numbers), witness O's testimony, part of the plaintiff's questioning results, the purport of the whole pleadings.

D. Determination

1) Determination on the first argument (whether title trust of the instant shares is held)

In full view of the following circumstances known through the purport of the above facts and the entire oral argument, it is reasonable to deem that the teaO traded the instant shares under its responsibility and calculation after opening a securities account in the Plaintiff’s name, and subsequent profits therefrom were attributed to the teaO. Therefore, it is reasonable to deem that the teaO held the title trust of the instant shares to the Plaintiff by borrowing KRW 2.52 million from the teaO, and otherwise, it is difficult to believe that the entries in the evidence No. 5 and No. 6, the witness testimony, and the results of the Plaintiff’s questioning, consistent with the Plaintiff’s argument that the tea acquired the instant shares by borrowing KRW 2.52 billion from the teaO, based on the following circumstances, are difficult to believe, and there is no other evidence to acknowledge the Plaintiff’s allegation otherwise.

① OO was involved in the opening of an OO securities account under the name of the Plaintiff, and the trading of all shares through the said securities account was conducted by OO on the basis of KRW 2.52 billion deposited in the said securities account, and all the withdrawal money table of the said securities account was prepared by OO or EO. The fact alone can be inferred that the said securities account is a title trust account of OO.

② The Plaintiff asserts that 100 million won was leased to CO and the interest was paid in 100,000 won per month. However, this is different from the statements made in the process of O’s tax investigation, and it is doubtful whether it was necessary to borrow money from an individual who is not a financial institution while paying high-rate interest (i.e.,, the Plaintiff’s assertion that PO is short of living expenses due to the lack of hospital expenses, nursing expenses, etc. as the PO was accumulated for more than 10 years on the ground of the fact that PO was a branch of disease.

The reason behind the conclusion of the judgment below is that the following facts are met: (a) the Plaintiff borrowed 100 million won from the Plaintiff; and (b) the Plaintiff did not directly participate in the establishment of a securities account, the selection of investment items, and the opening, withdrawal, etc. of a securities account and bank account in order to prepare for the O's ex post facto funds; and (c) the OO did not directly take part in the establishment of a securities account, the opening of a securities account, and the opening, withdrawal, etc. of a securities account and bank account; and (d) the O made O obtain a large amount of gains from the O’s own affiliated company’s affiliated company’s affiliated company to borrow 100 million won, a small amount of KRW 100,000,000,000,000,000,000 won, compared to the above gains from the OO’s affiliated with the company’s affiliated company, and it cannot be concluded

③ In light of the relationship between OOOO and BOO as seen earlier, KRW 200 million paid as the price for the increase of the company’s capital seems to have been paid for the increase of the company, not the Plaintiff.

④ At the time of this court’s questioning, the Plaintiff stated that, while holding a passbook (Account Number:*************) and seal on the Plaintiff’s name at the time of this court’s questioning, EO was asked to find money when withdrawing money from the passbook, EO was asked to find money, and that the money individually withdrawn from the passbook was only KRW 1.5 million for the medical machine purchase cost and KRW 1.5 million for the facot purchase cost. Unlike the Plaintiff’s statement, it is doubtful that OO or EO was not in custody of the above OO bank passbook and the Plaintiff’s seal.

this title.

⑤ In light of the fact that there is a career in OOO for twenty (20) years, there is good experience in securities trading practice and related knowledge, and that if OOO is expected to work as vice president in the field of OO construction and to have been described in the flow of funds, internal circumstances, etc. of OOO, if OOOO could have provided economic assistance to the mother, the transfer income could have been donated to the Plaintiff by acquiring and transferring OO shares, etc. that are anticipated to increase the stock price in its own name. As seen thereafter, it seems that there was an intention to reduce the global income tax burden on the dividend income of the instant shares by acquiring OO shares in the name of the Plaintiff and trading OO shares in the name of the Plaintiff, and in fact, to avoid the transfer income tax due to the

2) Determination of the second argument (whether there is a purpose of tax avoidance)

A) The legislative purport of Article 45-2(1) of the Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle with the purport of effectively preventing the act of tax avoidance using the title trust system, and realizing the tax justice. Thus, if the title trust was recognized as having been conducted for any reason other than the purpose of tax avoidance, and it is merely a minor reduction of tax incidental to the said title trust, it cannot be readily concluded that there had been such a purpose of tax avoidance. However, in light of the legislative purport as seen above, only if the purpose of the title trust is not included in the purpose of tax avoidance, it is impossible to determine that there was a purpose of tax avoidance by applying the proviso of the said provision, and thus, it cannot be said that there was no intention of tax avoidance. In addition, the burden of proving that there was no purpose of tax avoidance exists a person who asserts it (see Supreme Court Decision 2007Du19331, Apr. 9, 200).

B) The Plaintiff asserts that the primary reason why the tea has entrusted the title of ownership of the instant shares to the Plaintiff is to raise old age funds to the Plaintiff with the proceeds from the instant stock transaction, and that there was no objective of tax avoidance at all.

On the other hand, it is difficult to believe that the testimony of the witness carO, as seen above, has worked for 20 years at the OOO, and that the next OO, who was well aware of the fact that the maximum amount of gift tax is imposed in the case of stock title trust with abundant experience in securities transaction and related knowledge, was acquired and traded in the name of the Plaintiff for the purpose of raising the old fund for the Plaintiff even when taking the risk of imposing gift tax, and there is no evidence to prove that the title trust of the instant stocks was made for any reason other than the purpose of tax avoidance.

In addition, the following circumstances revealed through the purport of the above recognition and pleading, i.e., ① there is no persuasive explanation as to the fact that the title trust of the instant shares was conducted for any reason other than the tax avoidance purpose; ② there was a title trust with the Plaintiff not only in the similar time but also with the KimO, who was its subordinate staff; ③ if the title trust of the shares was deemed to have been conducted with the Plaintiff and thisO; ③ even if the global income tax on the dividend income evaded was not considered, the number of 10,386,253 won was not established; ④ in the case of the transfer of the shares of this case to 04 and 205, the Plaintiff was also subject to transfer income tax against the Plaintiff’s 200-year shares; however, in the case of the transfer of the shares of this case to 200-year shares, the Plaintiff was also able to avoid the transfer income tax by acquiring the shares under the name of the Plaintiff and the 200-year shares under the name of the 200-O's relative.

3. Conclusion

The plaintiff's claim is dismissed on the ground that it is without merit.