(a) Whether the obligation finalized by judicial reconciliation falls under the judicial finalized obligation under the proviso of Article 29-4(2) of the Inheritance Tax Act;

(b) When determining whether it falls under the proviso to Article 29-4 (2) of the Inheritance Tax Act;

(a) Debt determined by judicial compromise shall be also considered a debt determined by judicial resolution as prescribed in the proviso of Article 29-4 (2) of the Inheritance Tax Act;

(b) In case where the donee takes over the obligation of the donor in an onerous donation between his spouse, lineal ascendants or descendants, the amount of the obligation shall be deducted when determining the taxable value of the gift, which shall be determined at the time of donation in question.

Article 29-4(2) of the Inheritance Tax Act

Supreme Court Decision 86Nu859 Decided May 12, 1987

Plaintiff (Attorney Kim Young-ju, Counsel for plaintiff-appellant)

Head of Yongsan Tax Office

Seoul High Court Decision 87Gu582 delivered on November 3, 1987

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

In a case where a donee takes over such obligation from an onerous donation between his spouse or lineal ascendants or descendants, the amount of the obligation should be deducted when determining the taxable value of the gift tax. However, this should be determined at the time of the relevant donation (see Supreme Court Decision 86Nu859, May 12, 1987). Thus, if a donee’s obligation taken over at the time of donation was not determined by judicial compromise, it cannot be deemed as a judicial finalized obligation as referred to in the proviso of Article 29-4(2) of the Inheritance Tax Act, unless it was determined by judicial compromise after the donation.

In the same purport, the court below is just in holding that the plaintiff, who is a donee, after the contract of gift in this case, prepared a protocol of compromise with the purport that he will take over and pay the debt to the above non-party 1, and thus, it does not constitute a judicial finalized obligation as referred to in the proviso of the above provision of this Act, and in the lease contract under the above protocol of compromise with the judgment, it does not mention the obligation to return the lease deposit to the non-party 2 and the non-party 3, but only refers to the lessee's obligation such as monthly rent and name, etc., and therefore the plaintiff's obligation to return the lease deposit does not constitute a judicial obligation as referred to in the proviso of the above provision of this Act, and there is no error of law

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

Justices Park Jong-soo (Presiding Justice)