[1] Criteria to distinguish whether a title trust agreement is a registered title trust or a contract title trust between a third party

[2] In a case where determining whether a “house falling under three or more houses for one household” under Article 104(1)2-3 of the former Income Tax Act and Article 167-3(1) of the former Enforcement Decree of Income Tax Act is “house falling under three or more houses for one household”, whether the number of houses should be calculated by deeming the housing trusted by the title truster as owned by the title truster in the registered title trust relationship

[1] The distinction between whether a title trust agreement is a registered title trust between a third party or a contract title trust is determined as a matter of determining who the contracting party, and if it is recognized that a title truster entered into a contract with the intent to directly bring about the legal effect of the contract to the title truster rather than the title trustee, the title truster is a contracting party. Thus, the title trust relationship in this case should be deemed a registered title trust between the third party.

[2] In determining whether a “house falling under three or more houses for one household” under Article 104(1)2-3 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) and Article 167-3(1) of the former Enforcement Decree of Income Tax Act (amended by Presidential Decree No. 21934 of Dec. 31, 2009), a “house falling under three or more houses for one household” should be deemed to be owned by a title truster in a title trust relationship between the third parties and the number of houses should be calculated. The reasons are as follows.

The above provision is based on the means of heavy taxation of capital gains tax for the purpose of stabilizing housing prices and stabilizing residential life by suppressing the ownership of housing for speculative purposes.

However, in the case of a registered title trust between a third party, the registration of the title trust agreement and the name of the trustee is null and void, or the sales contract between the seller and the title truster is still valid. Therefore, the title truster may file a claim for the registration of ownership transfer based on the sales contract with the seller, and may seek for the cancellation of the registration under the name

In addition, as long as a sales contract between a seller and a title truster is valid, a seller who receives full payments from a title truster is liable to pay capital gains tax under the Income Tax Act. If a title truster transfers real estate at his/her own will, he/she shall be liable to pay capital

As such, in the registered title trust relationship between third parties, in that the title truster is in a position to dispose of the subject housing while controlling and managing it, and is the subject to whom income accrued from the disposition, it is reasonable to view that the title truster owns the subject housing in the application of the above provision, considering the legislative purport of the above provision, etc. to restrain ownership of housing for speculative purposes.

[1] Article 103 of the Civil Act / [2] Article 104 (1) 2-3 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009); Article 167-3 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21934 of Dec. 31, 2009)

[1] Supreme Court Decision 2010Da52799 Decided October 28, 2010 (Gong2010Ha, 2170) / [2] Supreme Court Decision 2001Da61654 Decided March 15, 2002 (Gong2002Sang, 882)

Plaintiff (Attorney Nowon-gu, Counsel for the plaintiff-appellant)

The Director of the sericultural Tax Office

Seoul High Court Decision 2015Nu67573 decided June 15, 2016

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The distinction between whether a title trust agreement is a registered title trust between a third party or a contract title trust is determined as a matter of determining who is the contracting party, and if it is acknowledged that a title truster, not a title trustee, has entered into a contract with the intent to directly bring about the legal effect of the contract to the title truster rather than a title trustee, the title truster is the contracting party. Thus, the title trust relationship in this case should be deemed a registered title trust between the third parties (see Supreme Court Decision 2010Da52799, Oct. 28, 2010).

The lower court, citing the reasoning of the first instance judgment, acknowledged the facts as indicated in its reasoning, and determined that the Plaintiff’s purchase of each of the instant housing as a party to each of the instant sales contracts, and only the registered title was the future of the title trustee, and the legal effect pursuant to the sales contract was recognized to have been the intention of directly reverting to the Plaintiff, the title truster, and thus, the title trust agreement with respect to each of

In light of the above legal principles and records, the above judgment of the court below is just, and contrary to the allegations in the grounds of appeal, the court below did not err by failing to exhaust all necessary deliberations and exceeding the bounds of the principle of free evaluation of evidence.

2. Regarding ground of appeal No. 2

A. Article 104 (1) 2-3 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) provides that the transfer income tax rate for "housing falling under three or more houses for one household prescribed by Presidential Decree" shall be 60/100 of the transfer income tax base, and Article 167-3 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21934 of Dec. 31, 2009) provides that "housing falling under three or more houses for one household prescribed by Presidential Decree" means housing owned by one household which owns three or more houses in Korea and does not fall under any of the following subparagraphs (hereinafter referred to as "instant provision").

B. In determining whether a “house falling under three or more houses for one household” as referred to in the instant provision is a “house falling under three or more houses for one household”, a house trusted by a title truster in a registered title trust relationship between the third parties shall be deemed to be owned by the title truster and the number of houses shall be calculated.

The instant provision is based on the tax-bearing capacity based on multi-house ownership in order to promote the stability of housing prices and residential stability by suppressing ownership of housing for speculative purposes.

However, in the case of a registered title trust between a third party, the registration of a title trust agreement and the name of a trustee pursuant thereto is null and void, or a sales contract between a seller and a title truster is still valid. Therefore, a title truster may file a claim against a seller for the registration of ownership transfer based on a sales contract, and a seller may seek the cancellation of a registration under the name of a title trustee, which is null and void in subrogation of a seller to preserve the right to claim the registration of ownership transfer (see Supreme Court Decision 200

In addition, as long as a sales contract between a seller and a title truster is valid, a seller who receives full payment of the purchase price from a title truster is liable to pay capital gains tax under the Income Tax Act. If a title truster transfers real estate at his/her own will, he/she shall be liable

As such, in the registered title trust relationship between third parties, in that the title truster is in a position to actually dispose of the subject housing while controlling and managing it, and is the subject to whom income accrued from such disposition, it is reasonable to view that the title truster owns the subject housing in the application of the above provision in light of the legislative purport, etc. of the instant provision, which seeks to restrain ownership of housing for speculative purpose.

C. In the same purport, the lower court is justifiable to have determined that the instant disposition, which excluded the special deduction for long-term possession pursuant to the instant provision on the premise that the Plaintiff, a title truster of the registered title trust, is the owner of each of the instant housing, was lawful, and applied the heavy taxation rate. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the application of three houses heavy taxation for

3. Conclusion

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 Poe-dae (Presiding Justice)