Plaintiff 1 and one other (Law Firm World Law Firm, Attorney Cho Jae-hun, Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

August 18, 2009

1. All of the plaintiffs' claims are dismissed.

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

Each imposition of capital gains tax of KRW 7,901,190 against Plaintiff 1 on December 1, 2007 and KRW 13,075,890 against Plaintiff 2 shall be revoked.

1. Details of the disposition;

A. Each real estate listed in the separate sheet No. 1 (hereinafter “each of the instant real estate”) was originally owned by the deceased non-party 1 (the birth date of December 20, 1920). According to the death of the non-party 1 on March 6, 2001, the Plaintiffs and their wife and children, and the non-party 2, 3, 4, 5, 6, 7 (hereinafter “Plaintiff, etc.”) were inherited. The Plaintiff, etc. reported a qualified acceptance on June 4, 2001, and received a qualified acceptance decision by the Jeonju District Court 201Mo195 on June 8, 2001.

B. After that, the bankruptcy trustee of Samyang Integrated Finance Corporation, the mortgagee of the right to collateral security, for each of the real estate listed in the list No. 1 of the annexed Table 1 and the real estate listed in the No. 2 of the annexed Table 1, Nonparty 8 received a decision to commence a voluntary auction of real estate from the Jeonju District Court on June 16, 2003 and June 19, 2003 on June 16, 2003 and 16394, and completed the registration of inheritance on behalf of the inheritors on July 15, 2003. The non-party 9, the mortgagee of the right to collateral security, completed the inheritance registration on each of the real estate listed in the annexed Table 1 list No. 3 by subrogation of inheritors on August 11, 203 and completed the inheritance registration on August 26, 2003 at the Jeonju District Court on August 26, 2003.

C. After that, each real estate listed in the separate sheet No. 1 list was adjudicated on September 10, 2004 in the previous district court of Jeonju, No. 2003ta, No. 16370, Sep. 10, 2004; the real estate listed in the separate sheet No. 1 list No. 2 was adjudicated on October 1, 2004 in the above court of 2003ta and 1 list No. 3; each real estate listed in the separate sheet No. 1 list was adjudicated between August 9, 2003 and September 24, 2004 in the voluntary auction procedure of No. 2003ta and 204. After that, the total auction price of each real estate of this case was distributed to Nonparty 1’s creditors in the above auction procedure.

D. The Defendant: (a) deemed that the successful bid of each of the instant real property, inherited property, falls under the transfer time; and (b) calculated gains on transfer corresponding to the Plaintiffs’ inheritance shares by making the date of the successful bid as the transfer time; and (c) imposed KRW 13,075,890 on Plaintiff 1 as capital gains tax belonging to the year 2004; and (d) accordingly, imposed KRW 13,075,890 on Plaintiff 2.

[Ground of recognition] Evidence No. 1-2, Evidence No. 2, Evidence No. 4, Evidence No. 5-1, 2, Evidence No. 8-1 through 3, Evidence No. 9-1 through 17, Evidence No. 1-3, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The plaintiffs are successors who made a qualified acceptance, and both the total auction price of each of the real estate of this case accrued from each of the above auction belongs to inheritance creditors, and the plaintiffs did not belong to the transfer income of each of the real estate of this case. Thus, the plaintiffs are not obliged to pay transfer income tax under the principle of substantial taxation. Accordingly, the dispositions of this case on different premise are unlawful in violation of the principle of substantial taxation.

(2) The Plaintiffs, as an inheritor for qualified acceptance, are not entirely responsible for the repayment of the inheritee’s obligation with their own property to the obligees in inheritance, and are merely responsible for the repayment of the inheritee’s obligation to the extent of the property to be acquired by inheritance. As such, the instant disposition that imposes capital gains tax on the transfer income of the inherited property for which a qualified acceptance was made on the inheritor is unlawful, contrary

(b) Related statutes;

Attached Form 2 shall be as stated in the relevant statutes.

C. Determination

(1) Determination on the first argument

The qualified acceptance of inheritance is entirely succeeded to the inherited property and the inherited property. However, it is premised on the succession to the inherited property as it is the premise that the deceased non-party 1 is responsible for the repayment of the inherited property only to the extent of the inherited property by separating the inherited property from the debt and the liability. Thus, the plaintiff et al. acquired each of the real property of this case, regardless of the transfer registration in the name of the plaintiff et al., under Article 162 (1) 5 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005), according to Article 162 (1) 5 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005), regardless of the transfer registration in the name of the plaintiff et al., on March 6, 2001, the transferor of each of the real property at each of the above auction proceedings belongs to the plaintiff et al.

(2) Judgment on the second argument

The transfer income tax imposed according to the heir's shares in inheritance is the inherent obligation of the heir for the actual transfer income generated by the auction of the real estate, which is an inherited property. Accordingly, the heir is not responsible for the repayment of inheritance obligations with the heir's inherent property beyond the limit of the property acquired by inheritance to the heir. Thus, the plaintiffs cannot be said to be contrary to the purport of the qualified acceptance system under the premise that the disposition of this case is liable to pay transfer income tax on the transfer income from the auction of each real estate of this case according to the heir's shares in inheritance

(3) Therefore, under the premise that the subject to whom capital gains from the successful bid of each of the instant real estate belongs is the Plaintiff, etc. who is a limited inheritor, the instant disposition imposing capital gains tax on the Plaintiffs corresponding to the respective inheritance shares is lawful.

3. Conclusion

Thus, the plaintiffs' claims are dismissed as it is without merit.

[Attachment]

Judges Kim Jong-soo