[1] Whether the provision of denial of wrongful calculation under Article 101 (2) of the former Income Tax Act infringes on property rights or goes against the principle of no taxation without law (negative)

[2] The case holding that donation of land to a specially related person constitutes an unfair act to unreasonably reduce capital gains tax from the transfer of land

[3] Whether the amount of gift tax already paid can be deducted in calculating capital gains tax (negative)

[1] Article 101 (2) of the former Income Tax Act (amended by Act No. 5191 of Dec. 30, 1996) / [2] Article 101 (2) of the former Income Tax Act (amended by Act No. 5191 of Dec. 30, 1996) / [3] Article 101 (2) of the former Income Tax Act (amended by Act No. 5191 of Dec. 30, 1996), Article 29-3 of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see Article 2 of the current Inheritance Tax and Gift Tax Act)

[1] Constitutional Court en banc Order 200Hun-Ba28, Jul. 24, 2003 (HunGong83, 666) / [3] Supreme Court Decision 94Nu15189, May 23, 1995 (Gong1995Ha, 2293) Supreme Court Decision 98Du11830, Sept. 21, 1999 (Gong1999Ha, 2256), Supreme Court Decision 2002Du12458, May 13, 2003 (Gong2003, 1353), Supreme Court Decision 2002Du950, Oct. 23, 2003

Lee Won-tae (Attorney Kim Ba-young et al., Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

Busan High Court Decision 2000Nu2853 delivered on September 7, 2001

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

1. Whether it violates the principle of no taxation without law

According to Article 101(2) of the former Income Tax Act (amended by Act No. 5191, Dec. 30, 1996; hereinafter “former Act”), where a person who donated assets to a specially related person for the purpose of unreasonably reducing capital gains tax and then donated assets to another person within 2 years from the date of donation, the donor shall be deemed to have directly transferred the assets. Article 101(4) of the same Act provides that the scope of the specially related person and other necessary matters shall be prescribed by the Presidential Decree. The above provision aims to regulate the act of tax avoidance to realize equality in taxation by regulating the act of tax avoidance, and thus, it does not go against the concept of "no taxation without the law" and "no taxation without the law" (see, e.g., Supreme Court en banc Decision 200Hun-Ba, supra., Supreme Court Decision 200Hun-Ba, supra, where the concept of "no taxation without the law" and "no taxation without the law" should be applied to the portion of the donor's property rights to be objectively or reasonably accepted.

The judgment of the court below to the same purport is just, and there are no errors in the misapprehension of legal principles as to the principle of no taxation without law or property rights.

2. Fact-finding and misapprehension of legal principles as to illegality

According to the reasoning of the judgment below, the court below acknowledged the facts as follows. The court below determined that considering the following circumstances: (a) the plaintiff donated the land of this case owned by the plaintiff to Lee Dong-young who is a woman, Busan Metropolitan City through consultation and payment of compensation, (b) Lee Young-soo had a considerable property before the above donation; (c) when the plaintiff himself transferred the land of this case, he would pay the gift tax; (d) he would pay the gift tax; (e) he would be able to gain profits by getting no transfer margin if he transfers the land of this case; (e) the plaintiff was well aware that Busan Metropolitan City would acquire the land of this case immediately in accordance with the expropriation procedure; and (e) the evidence submitted by the plaintiff alone alone alone cannot be deemed that the transfer price of this case belongs to Lee Young-young; and (e) it is reasonable to deem that the plaintiff was a donation to the person with a special relationship with the intention to reduce unreasonably the transfer income tax

In light of the relevant legal provisions and records, although the court below erred in the premise that an unfair act is established regardless of the actual attribution of capital gains for the type of transaction falling under the above provision, it is just in the conclusion that the plaintiff's act of donation in this case is unfair, and there is no error of law that affected the conclusion of the judgment due to misunderstanding of legal principles as to the determination of illegality or misunderstanding of facts due to violation of the rules of evidence

3. Whether to deduct the amount of gift tax.

The court below held that the gift tax paid by Lee Young-young due to the donation of the land of this case shall not be deducted as necessary expenses, but shall be calculated by deducting the amount of the transfer income tax of this case as already paid tax amount. Since the transfer income tax and the gift tax vary between taxpayers, taxation requirements, etc., it cannot be deducted from the amount of the gift tax already paid in calculating the transfer income tax, there is no error in the misapprehension of legal principles as to double taxation. Furthermore, in the above Constitutional Court Order 200HunBa28 of the above Constitutional Court Order, Article 101 (2) of the former Act of 200HunBa2 of the same Act of 200HunBa, if the applicable requirements are met, it can achieve the legislative purpose by only taking the gift act of the donor or the transfer act of the donee as taxation under the legal fiction, and it is not a violation of the Constitution of the Republic of Korea's property right by allowing double taxation and thus, it does not change the latter part of the gift tax under the latter part of Article 201 (2) of the Act.

4. Whether there exists any justifiable reason in imposing penalty tax;

The court below is just in holding that the Plaintiff did not report or pay capital gains tax on the ground that the Plaintiff did not know whether the provision of wrongful calculation was applied to the gift act and thus did not constitute a case where there was a justifiable reason to not report or pay capital gains tax, and there is no error of law by misunderstanding the legal principles as to additional tax.

5. 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 Shin Hyun-chul (Presiding Justice)