Cho High Court Decision 201Do3792 ( December 16, 2011)

Transfer profit substantially belongs to the donee and does not constitute an unfair act.

In light of the fact that a house was transferred after the lapse of four years and nine months from the donation of a house, that a witness was actually residing in a house donated, that the lease deposit was used by a witness, that part of the transfer deposit was used by the donor, but was returned to the donee after the donation, it does not constitute an unjust act of taking the form of donation to avoid capital gains tax.

Article 101 of the Income Tax Act

2012Gudan1535 Disposition of revoking capital gains tax

XX

Samsung Head of Samsung Tax Office

July 24, 2012

August 28, 2012

1. The Defendant’s disposition of imposing capital gains tax of KRW 000 (including additional tax) for the year 2010, which was rendered against the Plaintiff on August 2, 2011, shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. On March 24, 1995, the Plaintiff acquired and possessed the Songpa-gu Seoul Metropolitan Government 000-13 apartment houses with the third floor 0000 (hereinafter “instant house”) and donated the instant house to this A on December 7, 2005.

B. ThisA, after transferring the instant housing on August 20, 2010, deemed that it constitutes one household’s non-taxation, and did not report the transfer income tax.

C. However, on August 2, 2011, the Defendant: (a) deemed that the Plaintiff directly transferred the instant house pursuant to Article 101(2) of the Income Tax Act on the ground that “the Plaintiff donated the instant house to ASEAN, and transferred the instant house to another person within five years,” and (b) determined and notified the transfer income tax of 000 won for the year 2010 (including additional tax) (hereinafter “instant disposition”).

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 9, Eul evidence Nos. 1 and 2 (including provisional parcel number), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The parties' assertion

The plaintiff asserts that this case's housing was actually donated to the husband and wife of this case for five years after he was married to this case's family, and that the transfer price of this case's housing belongs to this case's family, in this case, it does not constitute an unfair act under Article 101 (2) of the Income Tax Act.

In this regard, the defendant asserts that the plaintiff's donation of the house of this case to son in order to reduce the transfer income tax unfairly, and that it constitutes an unfair act under Article 101 (2) of the Income Tax Act, since it transferred it again within five years

(b) Fact of recognition;

(1) On December 7, 2005, the Plaintiff donated this case’s housing to Lee, A, an A, an A, and his wife, KimB resided in the instant housing from that time.

(2) ThisA, while working in XX, has often worked in a foreign country, such as England and China, leased the instant house to Nonparty U.S. on or around March 6, 2008. Around March 6, 2008, some of the above lease deposit was deposited, and some of the lease deposit was used as the cost of going to the ster.

(3) The management of the instant house was mainly managed by the parents of thisA (the Plaintiff and his wife) as the husband and wife of this case resided abroad, including China. The parents of thisA took charge of the return of the lease deposit to the lessee of the instant house, the repair work of the instant house, and the disbursement of the expenses thereof. The Plaintiff and the husband, the parent of this case, were in charge of the sale of the instant house.

(4) Of the sales price of the instant housing, the amount disbursed as the repair cost of the instant housing was received by the Plaintiff’s husband and wife, and the remainder of the sales price was deposited into the account of thisA.

(5) The Plaintiff used part of the above sales price temporarily, but returned all of them to ASEAN.

[Reasons for Recognition] The above evidence, Gap evidence Nos. 1 through 8, 10 (including each number), Eul evidence Nos. 3 through 5, Eul's testimony, and the purport of the whole pleadings

C. Determination

The provisions of Article 101 (2) of the former Income Tax Act (amended by Act No. 5191, Dec. 30, 1996; hereinafter the same shall apply) (amended by Act No. 9270, Dec. 26, 2008; hereinafter the same shall apply) are intended to deny the transfer of a gift through the form of donation in order to avoid the transfer income tax and impose the transfer income tax on the donor who is the person to whom the actual income belongs (see, e.g., Supreme Court Decision 97Nu13979, Nov. 25, 1997; 2001Du4146, Nov. 10, 2003); where the donor has a genuine intent to donate the gift to the donee; and where the transfer income belongs to the donor, it is reasonable to deem that the act is not unfair.

In this case, the following circumstances, which can be acknowledged by the foregoing facts and evidence, (i) the Plaintiff was transferred the instant house after the lapse of four years and nine months from the donation of the instant house to the ASEAN, (ii) the Plaintiff was actually residing in the instant house after the donation of the instant house, and the lease deposit was used by the husband and wife; (iii) the Plaintiff’s management of the instant house was conducted by the Plaintiff’s husband and wife; (iv) the most of the transfer proceeds of the instant house was deposited into the account of this case, and (iv) the Plaintiff was temporarily using part of the transfer proceeds of the instant house; and (v) the Plaintiff was able to return the lease deposit money temporarily to the Plaintiff; and (v) the Plaintiff did not constitute an unfair donation under the social norms, by taking account of the fact that the Plaintiff’s temporary use of part of the transfer proceeds of the instant house was not attributable to the Plaintiff’s economic act under Article 10(1) of the Income Tax Act.

Therefore, the instant disposition that imposed capital gains tax on the Plaintiff by deeming that the Plaintiff directly transferred the instant house even though the donation of the instant house does not constitute an unfair act is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted on the grounds of its reasoning, and it is so decided as per Disposition.