Examination Donation 2016-005 (2016.05.09)

Where a re-division is made upon a separate will after the division of inherited property is completed, the donation shall be applicable to the donation.

Since the cash received by the Plaintiff is the money paid pursuant to a separate agreement to terminate the inequality between families surrounding inherited property after the completion of the division of inherited property, it constitutes a donation.

Article 31 of the Inheritance Tax and Gift Tax Act

Seoul Administrative Court 2016Guhap69932 revocation of disposition imposing gift tax

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○ Head of tax office

March 22, 2017

April 14, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition imposing gift tax of KRW 000 on the Plaintiff on August 11, 2015 is revoked.

1. Details of the disposition;

A. The Plaintiff is a co-born with the net highestCC (Death on October 14, 2013) and the largest DD, who were born between the network tearA (Death on July 15, 1993) and the networkB (Death on July 1, 2010).

B. The largestCC completed the registration of transfer of one’s own ownership on July 15, 1999 with respect to the land of this case with respect to the land of this case where the largestA owns 1/4 shares 00 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,000 m3,00 m3.

C. On August 24, 2006, LCC transferred 000 won of the instant land shares to DK Development Co., Ltd. (hereinafter “DK Development”), and remitted 000 won of each of the instant land shares to the Plaintiff and the most DD bank accounts on August 30, 2006.

C. On August 30, 2006, the Defendant decided and notified 000 won gift tax (including additional tax) to the Plaintiff on August 11, 2015 (hereinafter “instant disposition”).

D. The Plaintiff filed a request for examination with the Commissioner of the National Tax Service on February 11, 2016, upon filing an objection with the director of the Seoul Regional Tax Office, but was dismissed on May 9, 2016.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 12 through 14, Eul evidence Nos. 1 through 4, 6 through 8, 11 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

In consultation on the division of inherited property on March 14, 1994, EB, LCC, Plaintiff, and LD, which are coinheritors of LAA, agreed that EB, Plaintiff, and LD shall have divided the remaining inherited property other than this case’s land shares and part of the land they were donated by LAA, taking into account that LA was donated by LA to LB, LA, and LAD, the most south, the land ownership of this case was acquired for the purpose of pre-sale, excluding the land acquired for pre-sale. However, in the implementation of this agreement, LAC agreed to divide the case where the child of LAC, instead of being distributed to LAC, is independent of the land subject to division.

However, around 199, as the surrounding area of the instant land was determined as the planned development area and the price of the land increased, development enterprises started to come into contact with the co-owners of the instant land, such as the largestCC. For the convenience of sale of the instant land, the largestCC consented to the transfer of the share of the instant land under one-fourth to co-inheritors, thereby obtaining opinions from the Plaintiff, etc. that the proceeds of sale would be distributed one-fourths to co-inheritors, and the Plaintiff and the largestD agreed to acquire the share of the instant land under the first agreement. Accordingly, the instant disposition was unlawful since BB, the Plaintiff, and the largestCC consented to the acquisition of the share of the instant land under the sole name, and the maximumCC sold it after the registration of transfer of the share of the instant land was completed independently with respect to the instant share of 1.6 billion won, excluding taxes, etc. Accordingly, the Plaintiff received a maximum amount of KRW 00,000,000 from the Plaintiff, as the agreement was concluded in around 199.

2) The defendant's assertion

The division of inherited property with respect to the instant land share was terminated at the time of the agreement in 194 or at the latest 1999, and the largestCC sold the instant land share after seven years from the date on which it acquired the instant land share in its own sole name and paid KRW 000 to the Plaintiff. In light of such circumstances, 00 won constitutes donated property because it was either paid pursuant to the leastCC’s separate gift agreement or paid out through a re-division agreement among co-inheritors, taking into account the brine about the instant land share in the instant case after the completion of the agreement on division of inherited property, or the huge market price gains arising from the said agreement.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Even if some of co-inheritors acquire the property exceeding their own share of inheritance by mutual agreement as to the inherited property, it shall be deemed that it was retroactively received from the inheritee at the time of the commencement of inheritance, and it shall not be deemed that it was donated from other co-inheritors. Article 31(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Inheritance Tax and Gift Tax Act”) provides that “The property acquired by a specific inheritor in excess of the original share of inheritance by mutual agreement among co-inheritors after the commencement of inheritance becomes final and conclusive on the inherited property by registration, registration, transfer of title, etc. (hereinafter “registration, etc.”) and the value of the property acquired by a specific inheritor in excess of the original share of inheritance by mutual agreement among co-inheritors shall be included in the property donated from the inheritor whose share of inheritance is determined by mutual agreement among the inheritors (see Supreme Court Decision 201Du4141, Jul. 12, 2002).

The legislative intent of Article 31(3) of the Inheritance Tax and Gift Tax Act is to stipulate in accordance with the principle of substantial taxation in order to correct the problems not taxable even in cases where one transfers his/her share to another co-inheritors with the intention of donation after a long period of time has passed since the inheritance registration was made, because there are many cases where the division of inherited property takes a considerable time for the division of inherited property according to general practices, and it is not easy for the tax authorities to manage it continuously. Thus, in cases where the division is made after the completion of inheritance, it may be deemed as a gift if it is re-divisions based on a separate intention after the division of inherited property is made, but if the first division agreement is made after the commencement of inheritance,

Therefore, in a case where a co-inheritors transfers inherited property or a substitute therefor, whether it is subject to gift tax depending on whether it was transferred by a separate intention after the division of inherited property is terminated or transferred according to the initial agreement on division of inherited property. The agreement on division of inherited property is possible as there is no special limitation under the law, and thus, it also includes a case where a part of the initial agreement on division of inherited property is to pay to other co-inheritors instead of acquiring inherited property. However, if the agreement on division of inherited property is terminated without the agreement on payment of price, the amount that some co-inheritors paid to other co-inheritors can be deemed as subject to gift tax, barring special circumstances.

2) The following facts are acknowledged according to the respective descriptions of Gap evidence Nos. 1, 4 through 11, 13, 14, and Eul evidence Nos. 2 through 10 and the purport of the whole pleadings.

A) The details of the inherited property remaining in the name of the largestA at the time of the death of the largestA and the details of the land asserted by the Plaintiff that the largestCC was given a prior donation from the largestA are as listed below. In a certified copy of the register, the land below the land was acquired by the largestCC from 1971 to 1985, and the land was annually donated by the largestCC on April 27, 1990.

Table Omission of the Table

B) On March 14, 1994, the title “WB, the largestCC, the Plaintiff, and the largestD”, which are co-inheritors of the largestA, agreed to receive the land of “Plaintiff 5 Mamm (00 square meters), the maximum D360 square meters (00 square meters), the 5 Mamm (00 square meters), and the 5 Mamm (00 square meters) EB (hereinafter “the first agreement”).

C) On October 9, 1998, mostD completed the registration of ownership transfer with respect to land No. 1 in the above land as the cause of registration for inheritance by consultation and division on July 15, 1993. The plaintiff completed the registration of ownership transfer with respect to "305/400 of the land No. 9 in the above land" on March 8, 1999 as the cause of registration for "sale on February 10, 1999." And as seen above, the largestCC completed the registration of ownership transfer with respect to the share of the above land (No. 2, 3, and 4 of the above land) on August 30, 1999.

D) The main contents of the copy of the register of the instant land are as follows.

Table Omission of the Table

3) In light of the above facts acknowledged and the following circumstances revealed, the Plaintiff’s maximum amount of KRW 000, which the Plaintiff received from theCC, can be deemed as the money paid pursuant to a separate agreement in order to terminate the extinguishment between families surrounding inherited property after the division of inherited property is completed through the first agreement. Thus, the instant disposition is lawful and the Plaintiff’s assertion is without merit.

① Most of the lands alleged by the Plaintiff as a prior donation had already been acquired by the largestCC for a long time, and thus it is difficult for the Plaintiff or the largest DD to clarify that the said land was donated to the Plaintiff, and there appears to have been disputes among co-inheritors. According to the first agreement, the land area to be acquired by the Plaintiff, the largest DD and EB is a total of 7,800 square meters. The said land area is equal to the annual land No. 1 remaining in the largestA name and the annual land No. 8,812 square meters recorded in the certified copy of the register, which were the sum of the land No. 8,812 square meters recorded in the certified copy of the register. In light of these circumstances, co-inheritors may be deemed to have completed the division of inherited property by dividing the land No. 8,9 land and inherited property donated by the largestCC from the Plaintiff, the Plaintiff, and the largest DD.

② Since the share in the instant land remaining in the name of the largestA (the land No. 2, 3, and 4) was not excluded from the consultation on division of inherited property, rather than the Plaintiff’s assertion, and was the land to be used in advance for the purpose of pre-sale, and it is difficult to recognize the value of the common land due to the difficulty in disposal, use, and profit-making, etc., the co-inheritors appears to have held an agreement on the premise that the largestCC, a de facto south of the share in the instant land in the course of the consultation on division of inherited property, actually acquired the share in the instant land in the process of the consultation on division of inherited property. Accordingly, even though the share in the instant land remains in the name of the largestA, it was not written in the first agreement that was prepared to terminate the dispute between co-inheritors. Accordingly, it can be deemed that the largestCC was the sole acquisition at the time of

③ The instant land shares were sold to DK development in 2006 after 7 years from the 1999 when the registration of ownership transfer was completed in the middle of the largestCC. Moreover, the most FF holding shares were the inheritance registration of the heir on March 22, 2006, and the mostG holding shares were the registration of prohibition of disposal on April 28, 2006. In light of the foregoing, it is difficult to view that the instant land was already scheduled to be sold in the lastCC at the time of the completion of the registration of ownership transfer, and it is difficult to view that there was an agreement among co-inheritors on the sale of the instant land on the premise that the sale was completed. However, as the implementation of the first agreement above, it is determined that the largestCC would have transferred the instant land and the instant land shares to the largest DD and the Plaintiff once a year.

④ Although the sale price of the instant land was KRW 000, the actual Plaintiff and the largest DD merely received KRW 000 from the largestCC. Whether there is a tax and public charge deducted from the sale price, whether the largestCC deducteds KRW 000 from the amount that it intended to pay to the Plaintiff and the largest DD, or not, according to the evidence No. 15, there is no evidence suggesting that the BB was paid KRW 00 from the largestCC. If the Plaintiff agreed to receive KRW 1/4 of the sale price of the instant land shares from the beginning to the beginning, there is a high possibility that such data would have been secured in advance. Rather, in other words, the Plaintiff would have agreed to complete all matters related to the previous distribution of the property by receiving KRW 00 from the largestCC.”

3. Conclusion

The plaintiff's claim is dismissed as it is without merit, and the costs of lawsuit shall be borne by the plaintiff who has lost. It is so decided as per Disposition.