Cho High Court Decision 2010Du0478 (O1.07)

Imposition of gift tax on title trust with the purpose of tax avoidance is legitimate.

It is determined that stocks that are not leased are held in title trust, and the amount of tax reduced according to the tax base, etc. of dividend income or global income tax may vary significantly, and thus it cannot be concluded that gift tax is merely a minor reduction of tax. Therefore, gift tax

2011Guhap26636 Revocation of Disposition of Imposition of Gift Tax

Lee Dong-A et al.

○○ Head of tax office

March 17, 2011

August 25, 2011

1. All of the plaintiffs' claims are dismissed.

2 The costs of lawsuit shall be borne by the plaintiffs.

The Defendant’s imposition of gift tax of KRW 30,022,940 against the Plaintiffs on October 1, 2009 shall be revoked, respectively.

1. Details of the disposition;

A. BBB Commissioner of the National Tax Service conducted a stock change investigation with respect to theCC Industry Co., Ltd. (hereinafter “CC industry”) from March 24, 2008 to June 27, 2008, based on the following: (a) around July 14, 2003, the Plaintiff Company: (b) opened a securities account by lending the Plaintiff’s name to the EEE Co., Ltd. (hereinafter “EE”); and (c) around July 15, 2005, the Plaintiff Company notified the Defendant of the pertinent stocks acquired the Plaintiff Company’s stocks by deeming that the Plaintiff Company’s stocks were paid KRW 200,000,000,000, to the FFFFFFF (hereinafter “FFFFF”), participating in the name of the Plaintiff Company, and withdrawn from the UGG’s above securities account, as capital increase payment to the FFFFF; and (d) considering that the Plaintiff Company’s stocks were acquired by the Plaintiff 40,000.

B. Accordingly, pursuant to Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act"), the Defendant deemed that Plaintiff A received the instant shares from Plaintiff BD, and calculated the value of deemed donation on the instant shares as of July 15, 2005, the date of capital increase for new shares issued, and imposed KRW 30,022,940 on Plaintiff BA on October 1, 2009, while notifying Plaintiff DD of the duty to jointly pay the said gift tax on the same day (hereinafter referred to as the "total imposition of each of the above dispositions").

'Disposition'.

C. On January 7, 2010, the Plaintiffs were dissatisfied with each of the instant dispositions and filed an appeal with the Tax Tribunal. However, on March 29, 2010, the Tax Tribunal rendered a decision to dismiss all the Plaintiffs’ appeals.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1 and 2 (in the case of documentary evidence with several numbers, including each subparagraph (a) unless the number is specified), Eul evidence Nos. 2, and the purport of the whole pleadings

2. Summary of and judgment on the Plaintiff’s assertion

A. Summary of the plaintiff's assertion

Each of the dispositions of this case shall be revoked on the grounds as follows.

(1) From July 14, 2003 to July 16, 2004, the Plaintiff Company: (a) solicited the UG to make an old age fund through equity investment; (b) lent KRW 2,520,000 to the UG during the period from July 14, 2003 to July 16, 2004; and (c) only after the UG made an investment in stocks with the above loan and made a certain amount of profit; and (d) paid the above borrowed principal to the Plaintiff Company, the Plaintiff Company was participating in the capital increase issued by the FFFFF to the Plaintiff Company in the name of the Plaintiff Company; (c) apart from the fact that the UG or the Plaintiff Company, the title holder of the Plaintiff Company, who paid the said capital increase, is the owner of the instant shares; and (d) under the premise that the Plaintiff Company actually acquired the instant shares, it cannot be deemed that the Plaintiff Company held title trust with respect to the instant shares.

(2) Even if the title trust was entrusted to Plaintiff DaD ReasonsG with the title of ownership of the instant shares, the fact that the said title trust was mainly aimed at raising the NG’s old age fund with the profits accrued from a stock transaction. There is no room to conclude that the transfer income tax is levied even if the relevant shares are transferred, and that the global income tax on the dividend income of the instant shares avoided from the title trust was not outstanding, the title trust of the instant shares cannot be deemed as a gift, on the contrary to the lack of the purpose of tax avoidance at the time of the said title trust.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c)a recognition;

(1) The UG was born in 1940 and re-born with the Plaintiff Lee H (the Plaintiff’s spouse) in around 1990. The Plaintiff II served for approximately twenty (20) years in the EEK group with the president of Kim JJ, a major shareholder of theCC industry, as the wife of the Kim JJ industry, while working for the EEK group with approximately twenty (20) years, and served as the vice president in the construction sector of theCC industry from May 2004.

(2) 원고 차DD은 2003. 7. 14 유GG와 함께 EEEE 중앙지점을 방문하여 유FF 명의의 증권계좌(001-11-274486)를 개설한 후, 같은 날부터 2004. 7. 16.까지 사이에 14회에 걸쳐 합계 25억 2천만 원을 위 증권계화에 입금하였는데, 위 증권계좌의 비밀번호는 아래에서 보는 이QQ의 증권계좌의 비밀번호와 동일한 2336이다.

(3) On September 4, 2003, the Plaintiff Company purchased KRK stocks, etc. on several occasions on several occasions on February 17, 2005 through the said securities system. The Plaintiff Company transferred CC industry stocks, etc. on several occasions between June 1, 2004 and February 23, 2005. The total amount of the transfer proceeds is KRW 3,05,000,000.

(4) After August 11, 2004, the details of the changes in the deposit deposits for the said securities system are as follows. The Plaintiff CC or EL drafted all the deposit slips for the said deposit deposits and the deposit slips for the following MF bank accounts.

① The CD 2004: the sum of KRW 950 million in August 11, 2004, KRW 650 million in September 9, 2004, KRW 150 million in November 3, 2004, KRW 820 million in February 21, 2005, and KRW 2.52 million in the sum of KRW 8.2 million in the bankation of Plaintiff nextD.

(2) The amount of KRW 500 million deposited from March 11, 2005 shall be deposited into the MP branch account (the opening date: March 10, 2005; the account number: 320-04-565219) in the name of the UG.

(3) A balance of 36,469,890 won withdrawn on April 8, 2005 and deposited in another MPP account in the name of UG (the opening date: the opening date: March 14, 2005; the account number: 320-04-56529).

(5) The above KRW 500 million deposited in the MM bank account (320-04-565219) in the name of UG was transferred to another MM bank account in the name of UG (320-04-56529, and then 110-172-861302). The deposit account of the above MM bank (110-172-8613 Q2) deposited in the above MM bank (the amount included in the deposit amount around April 8, 2005) was used as follows. The following acts were all of the following Plaintiff DD.

① Payment for capital increase with consideration of the FFFF by withdrawing KRW 200 million on July 14, 2005.

② 2005. 8. 16.에 2억 2천만 원을 출급하여 원고 차DD의 처제인 이QQ 명의의 RR 주식회사 증권계좌로 입금

③ On July 5, 2005 and February 3, 2006, respectively, KRW 15 million for each of the following documents: (a) the time frame of the Plaintiff teaW.

T Bank Account (100-23263-262)

④ On January 3, 2008, KRW 100 million shall be deposited into the account of the Plaintiff’s father next SS’s Tbank.

(6) On May 2, 2008, under investigation conducted by the National Tax Service on BBB, it stated to the effect that, without knowledge of the process of opening the said EE Securities Account and the details of entry and withdrawal, the source of funds deposited in the said Securities Accounting System, etc., the UG merely worked for HG. In addition, the UG stated to the effect that, at the time of the party principal questioning of the case 2010Guhap31867 at the court of this case seeking the revocation of the disposition imposing gift tax on itself, it was holding the passbook and seal of the above MG bank account (Account number: 10-172-861302) at the time of the party principal questioning of the case 2010Guhap31867, which sought the revocation of the disposition imposing gift tax on itself, it was the withdrawal of money from the above account to himself and stated that HG was the purchase cost of 1.5 million won and 1.5 million won for personal withdrawal from the above account.

(7) The plaintiff II drafted three copies of the loan certificate for the use that the UG borrowed a total of KRW 2.5 billion from itself ( KRW 40 million on March 29, 2004, KRW 1.04 billion on April 29, 2004, KRW 810 billion on July 16, 2004, and the annual rate of KRW 60 million on each of the agreements). The UG affixed a seal on each of the above loan certificates to the name of the original owner, but the UGG did not pay the interest item on the said loan to the plaintiff DD.

(8) With respect to KRW 100,00,00,00,000, which was remitted from the reorganization of the LBB National Tax Service to the next TB bank account of the LG, this H received the said money in the form of borrowing from the UGG to be deducted from the inheritance liability in calculating the inheritance tax base (the borrowing certificate was prepared on January 3, 2008 between the UG and the nextS) in fact, while the SS did not actually borrow money from the UGG from the UGG for more than 10 years, and the SS did not have been able to receive money from the UGG since 2006.

(9) Meanwhile, the FFF is the lighting organization wholesale company established by the plaintiff next D, and the major business partners since 2003 are theCC industry. On December 31, 2001, each shareholder's share ratio was 50% of the plaintiff next H 40%, the plaintiff next D head, the south of the plaintiff next D head, and the 5% of the next V, respectively, respectively, and on December 31, 2002, the plaintiff next SheW, a donation of all shares from the above shareholders, owned 10% of the FFFFFFF capital shares, and since January 1, 2004, only the above company's capital increase was registered only in the above company's capital increase without being paid to the plaintiff next DaF 205, but only the above company's capital increase and part of the plaintiff next DaF 175,005.

(10) 원고 차DD은 처제인 이QQ 빛 과거 부하직원이었던 김XX의 명의로 각 증권계좌를 개설하여 위 각 계좌를 통한 주식거래를 하였고, 원고 차DD이 위와 같은 주식거래를 통하여 이QQ 및 김XX의 명의로 취득한 주식 등은 이QQ 및 검XX이 원고 차DD으로부터 증여받은 것으로 의제되어 각 증여세가 부과되었는데, 원고 차CC과 김XX은 김XX 명의의 증권계좌에 관하여, 원고 차DD이 김XX의 명의를 벌 어 개설한 계좌임을 자인하였다.

[Ground of recognition] Facts without dispute, Gap's 3 through 6, 10, 28 evidence, Eul's 5 and 8 evidence, Gap's 27 evidence, Eul's 6th floor, and the purport of the whole pleadings

D. Determination

(1) As to whether title trust with respect to the instant shares is held

In full view of the above facts and the following circumstances revealed from the above, insofar as it appears that the Plaintiff Company opened a securities account in the name of the Plaintiff Primary GG and traded shares for its own account through the said securities account, it is reasonable to view that the Plaintiff Company Company held that, with respect to the shares of this case acquired by the Plaintiff Company Company through the Plaintiff Company’s participation in the FFFFF’s capital increase with the name of the Plaintiff Company in the name of the Plaintiff Company, and the payment of the subscription price with the deposited money for the said securities transfer, Plaintiff Company Company held title trust with the Plaintiff Company. Accordingly, it is reasonable to view that the Plaintiff Company Company Company held that the Plaintiff Company held title trust with respect to the shares of this case, which were acquired by paying the subscription price for new shares with the deposited money for the said securities transfer. Contrary to this, each of the entries in the evidence Nos. 7, 10, Party A’s evidence Nos. 27, 28, and Party B’s evidence

① As alleged by the Plaintiffs, even if the Plaintiff’s assertion was to borrow a certain amount of money to the Plaintiff IIG and to receive a consignment from the UG from the UG for stock transaction using the said money, it is extremely exceptional that: (a) in doing stock transaction via the said securities account based on the KRW 2.52 billion deposited in the said securities account, the preparation of the said securities account’s deposit money table and the deposit transfer slip to another bank account in the name of UG, and the deposit transfer slip to the said securities account in the UG’s name, and that it would exceed the scope of the authority of the mandatary granted under the general stock transaction contract.

② The Plaintiffs’ assertion that UG lent KRW 100 million to SS and received interest KRW 1 million each month, and that the Plaintiff borrowed money from UGG, which is difficult to move in due to C, under the terms of payment of a considerable amount of interest per month (such as the content stated in the tax investigation process, if the HH has to prepare for inheritance due to considerable property in SS as stated in the tax investigation process, it is difficult to understand the above amount). In addition, in the course of the tax investigation, the Plaintiffs stated that this amount of money is different from the above assertion. In addition, in order to raise the UG’s de facto fund, the Plaintiffs were able to participate in the establishment of a securities account, investment issues, and stock transactions, etc., and to obtain a large amount of profits from stock transfer in the future, and provided that it would be difficult to obtain a large amount of profits from stock transfer in the process of collecting the above SH’s credibility in the process of collecting the above SH’s income from the above SH’s loan under the condition that it will be paid to 10G.

③ According to the Plaintiffs’ assertion, in order to raise the retirement fund of the Plaintiff, the Plaintiff’s second-aid company loaned money to the Plaintiff’s second-aid company, and offered profits to the UG through stock transaction. If part of the money is paid as the price for issuing new shares for the instant shares, then it would be very infinite to the Plaintiff’s participation in issuing new shares under the name of the Plaintiff, not in its own name, without any special reason.

④ Although the UG used most of its profits to lend or donate to its children, etc. or to pay capital increase with capital increase for the instant stocks even though it obtained considerable gains from stock transfer up to KRW 100 million from the day it was entrusted with a transaction of stocks to its children, etc., it is not consistent with the common sense in light of the purpose of the said funds to use only the extremely small amount of the said profits for personal use, which is the sum of KRW 3 million out of the said profits, for the purpose of the said funds.

(2) As to the existence of the purpose of tax avoidance

The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle in the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, it cannot be readily concluded that the title trust was made for any reason other than the purpose of tax avoidance, and that there was a minor tax reduction incidental to the said title trust, and that there was a minor purpose of tax avoidance. However, in light of the legislative purpose as seen above, inasmuch as the purpose of the title trust is not included in the purpose of the title trust, it cannot be deemed that there was an intention of tax avoidance by applying the proviso of the said provision only when the purpose of the title trust is not included in the purpose of tax avoidance, and thus, it cannot be said that there was no purpose of tax avoidance. In this case, the burden of proving that there was no purpose of tax avoidance exists a nominal person who asserts it (see Supreme Court Decision 2007Du1931, Apr. 9,

On the other hand, we look at the instant case’s return to the Plaintiff, which seems consistent with the Plaintiffs’ assertion that there was no objective of tax avoidance on the instant shares, and each part of the Plaintiffs’ evidence Nos. 27, 28, and 5, 6, and 8 were stated in the EE that the Plaintiff’s experience in securities transaction and related knowledge may be subject to a large amount of gift tax in the case of stock title trust, due to the high career experience in the EE for a multi-year period, and that the amount of gift tax may be subject to a large amount of gift tax in the case of stock title trust. While Plaintiff DoD participated in the instant DoD’s capital increase and acquired the instant shares under Plaintiff DoD’s name, it is difficult to readily conclude that Plaintiff DoD was merely an assertion that there was no other purpose than the purpose of tax avoidance (i.e., the Plaintiff’s global income tax reduction for the Plaintiff’s global income tax base, as otherwise alleged in the Plaintiff’s global income tax evasion, and thus, it is difficult to deem that there was a difference in the Plaintiff’s tax reduction of the Plaintiff’s tax base.

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed as it is without merit. It is so ordered.

shall be determined as above.