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

Article 29-4 (2) of the Inheritance Tax Act is a provision on the calculation method of the taxable amount of gift taxes in a case where a donee fails to take over or takes over the debts of a donor when a onerous donation is made between his spouse, lineal ascendants or descendants, and thus, in case where a donee takes over the debts of a partner who is not a donor and takes over the real estate that guarantees his debts from

Article 29-4 of the Inheritance Tax Act

Plaintiff

Head of the Do Tax Office

Seoul High Court Decision 85Gu516 delivered on January 22, 1986

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal by the defendant litigant are examined.

The judgment of the court below accepted the Plaintiff’s claim for revocation of tax disposition on the ground that it was unlawful for the Plaintiff to impose the gift tax without deducting the amount of the debt, considering the following: (a) the Plaintiff, the principal obligor, at the time of acquiring the instant real estate from Nonparty 1’s father, was unable to repay the said debt; (b) Nonparty 2, who is the principal obligor, was unable to exercise the right to reimbursement; and (c) the Plaintiff was insolvent; and (d) the Plaintiff acquired and repaid the said debt to the Ansan Mutual Savings and Finance Company, a financial institution prescribed in Article 29-4(2) of the Inheritance Tax Act; and Article 40-5 of the Enforcement Decree of the Enforcement Decree of the same Act, the Plaintiff acquired the said real estate; and (e) the Plaintiff acquired the

Article 29-4 (2) of the Inheritance Tax Act provides that the amount of debts shall not be deducted even in cases where the donee takes over the obligation of the donor by a spouse, or lineal ascendants or descendants (including the donation under the provisions of Article 34): Provided, That this shall not apply in cases where the donee objectively deemed capable of repaying the obligation in view of gender, age, income, property status, etc., takes over the obligation of the State, local governments and other financial institutions prescribed by the Presidential Decree or the obligation of judicial final and conclusive decision-making. This is a provision on the method of calculating the taxable amount of gift taxes in cases where the donee does not take over or takes over the obligation of the donor when the donee takes over the obligation of the donor at the time of onerous donation between his spouse, lineal ascendants or descendants, and thus, it is not applicable in cases where the donee takes over the obligation of the donor

Therefore, the judgment of the court below that the plaintiff deducteds the debts of the non-party 2 from the value of the gift of the real estate that the plaintiff acquired from his father pursuant to the proviso of Article 29-4 (2) of the Inheritance Tax Act is erroneous as it points out the interpretation of the above provision.

Therefore, the judgment of the court below is reversed, and the case is remanded to the Seoul High Court. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Jong-soo (Presiding Justice)