The case holding that an imposition of capital gains tax on a simple title trustee is illegal

After eight persons, including the plaintiff, jointly purchased the land and divide it into several units, they agreed to construct one house, and paid only 50,000 won out of 5,50,000 won to be borne by the plaintiff, and completed the registration of ownership transfer under the above eight joint names and thereafter, the ownership transfer registration was completed under the name of the plaintiff for the reason of dividing the common property, but thereafter, the plaintiff terminated the housing construction agreement with the remaining seven persons due to the aggravation of the financial standing of the plaintiff, and refund 50,000 won already paid, and thereafter, the non-party (A) completed the housing construction and completed the registration of ownership transfer under the name of the plaintiff on the land of this case without compensation, the plaintiff is merely a title trustee, and thus, it is unlawful in violation of the principle of substantial taxation.

Articles 7 and 23 of the Income Tax Act

Supreme Court Decision 83Nu531 Decided March 27, 1984

Plaintiff

Gangwon-gu Director of the District Office

Seoul High Court Decision 84Gu222 delivered on March 13, 1985

The appeal is dismissed.

The costs of appeal shall be borne by the defendant.

Each ground of appeal by the defendant litigation performer shall be examined together.

The court below held as follows: (a) the real estate (site) as indicated in its reasoning is registered as the Plaintiff acquired on July 28, 1978 and transferred to Nonparty 1 on July 31, 1979 on the registry; (b) however, around the end of April 1978, the Plaintiff agreed to purchase the land jointly with Nonparty 2, etc. and eight persons including the Plaintiff, divide it into one unit of house; and (c) paid only 50,000 won out of the land price to be borne by the Plaintiff; and (d) the above eight persons including the Plaintiff purchased 5,50,000 pieces of land including the site in this case and completed the registration of transfer of ownership under the joint name of eight persons; (b) the Plaintiff did not lawfully acquire the ownership of the Plaintiff’s real estate under the name of Nonparty 1 on the land in this case, and thus, the Plaintiff’s disposal of the land in this case was unlawful since it was difficult for the Plaintiff to obtain the ownership transfer of the above real estate under the name of the Plaintiff and its owner.

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

Justices Shin Jong-sung (Presiding Justice)