Daejeon District Court 2014Guhap104833 ( November 11, 2015)

In title trust, the title trust donation cannot be taxed with a clear purpose of tax avoidance to the extent that it is recognized that there was no tax avoidance purpose.

The grounds for the claim by the Plaintiffs cannot be readily concluded to be a clear purpose irrelevant to the tax avoidance to the extent that it is recognized as having no tax avoidance purpose.

Donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

Daejeon High Court 2015Nu13688

Economic Zone

XX Head of tax office

Daejeon District Court 2014Guhap104833

oly 2016.105

November 02, 2016

1. Details of the disposition;

A. Plaintiff AA prepared a share acquisition agreement on April 13, 201 with 22,00 shares of Plaintiff AA (hereinafter referred to as “instant shares”) owned by her mother to CCC, 5,000 shares to Plaintiff B, a director of the relevant district class, 5,500 shares to DD, 5,500 shares, and 5,500 shares to EE, a father’s branch, respectively (hereinafter referred to as “title trust of this case”), and with the above 4 trustees (hereinafter referred to as “Plaintiff B, etc.”) to transfer KRW 5,00 per share (hereinafter referred to as “share acquisition agreement of this case”). The shares of this case were transferred to Plaintiff B, etc. through the share acquisition agreement of this case (hereinafter referred to as “share acquisition agreement of this case”).

B. On June 14, 2012, Plaintiff AA returned 5,900 shares out of 6,000 shares trusted in title to CCC.

C. On June 30, 2012, Plaintiff AA reported the transfer income tax on the transfer of the instant shares to the Defendant. However, on December 10, 2013, Plaintiff AA demanded that the transfer of the instant shares is the transfer of the shares to the related parties and submit explanatory materials on the ground that the transfer of the shares was the transfer of the shares to the related parties. Plaintiff AA and FF were divorced between the Daejeon Family Court’s 2013D ConsolidatedOOO (principal lawsuit) divorce, etc. and the 2013D ConsolidatedOOO (Counterclaim) divorce, etc.

D. Pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act"), the Defendant deemed that Plaintiff A donated the instant shares to Plaintiff BB, EE, and DD (hereinafter referred to as the "Plaintiff BB, etc.") pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act"), the Defendant: (a) designated the market price of shares as an OO for each share and assessed the value of donated property of DD, etc. as an OO, OO, and OO; and (b) designated Plaintiff AB as a joint taxpayer of the gift tax and imposed the gift tax equivalent to each of the above Plaintiffs (hereinafter referred to as "each of the aforementioned dispositions imposed gift tax").

E. The Plaintiffs appealed and filed a tax appeal on April 29, 2014, but each dismissed.

2. Whether the instant disposition is lawful

A. Summary of the plaintiffs' assertion

The title trust of this case was aimed at defending the division of property by divorce with the FF and did not have the purpose of tax avoidance. Therefore, it does not constitute the subject of gift tax under the main sentence of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act.

B. Relevant statutes

Attached Table 1 is as shown in the "relevant Acts and subordinate statutes".

C. Determination

1) Relevant legal principles

The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to effectively prevent the act of tax avoidance using the title trust system, thereby recognizing an exception to the principle of substantial taxation. Thus, if the title trust was recognized to have been made for reasons other than the purpose of tax avoidance, and only a minor tax reduction incidental to the said title trust arises, it cannot be readily concluded that there was a "tax avoidance purpose" in such title trust. However, in light of the legislative purport as above, only when the purpose of the title trust is not included in the purpose of tax avoidance, it is impossible to determine that there was an intention of tax avoidance by applying the proviso of the above provision, and it is not deemed that there was an intention of tax avoidance. Whether there was an intention of tax avoidance or not, it is determined as at the time of the title trust, and it is not determined as whether there was tax avoidance or tax avoidance. Meanwhile, the burden of proving that there was no objective or objective purpose of tax avoidance, not to mention the title holder, but to prove that there was no other objective or objective purpose of tax avoidance (see, 20. 16).

(ii) the facts of recognition

The following facts may be acknowledged if there is no dispute between the parties or if the whole purport of the pleadings is added to the statements in Gap's evidence, Gap's evidence, 3, 4 through 7, 10 through 12, 18, 20 through 27, Eul's evidence, 3 through 8, and 13 through 15:

A) A company established on June 5, 199 for the purpose of the production of housing materials and civil engineering materials (formerly, Plaintiff AA’s fatherOOOOOOOOOOOOOOOOOOOO of 1980s) is located in PO2-ro OOOOOOOOO of 199. Plaintiff AA was working as a director or internal director of the relevant commercialization, from March 12, 2002 to March 22, 2012, and the representative director of the relevant commercialization was employed from March 12, 2008 to March 22, 2012. Plaintiff AAO acquired each of the shares issued by each of the instant OOO shares through investment on June 5, 199, and held each of the shares issued by each of the instant O shares acquired on September 7, 2007.

B) Meanwhile, YY Co., Ltd. (hereinafter “YY”) is a company established on January 14, 201 for the purpose of civil engineering and construction work, and has its head office in the same place as the location of its head office. Plaintiff AA has worked as an internal director and representative director of YA from the beginning of the establishment of YY to that date.

C) On January 14, 201, Plaintiff A made an investment to hold 20,50 shares of Y total 41,000 shares of YY (hereinafter “the instant YY shares”). However, Plaintiff A made an agreement on title trust with YY shares of D (as from March 23, 2012 to the date of establishment of YY) and HH (as from March 23, 201, YY’s in-house director) with 10,250 shares, each of these shares were transferred to YY shares, and YY shares were transferred to the trustee on December 13, 2012 (hereinafter collectively referred to as “YY shares transferred to Y” and “YY shares transferred to the trustee” (hereinafter collectively referred to as “YY shares transferred to hereinafter).

D) On October 26, 2001, Plaintiff AA submitted a divorce report on November 21, 201, while married with FF and continuing married life. However, FF refused divorce on the grounds of division of property, and on April 22, 2013, FF filed a divorce lawsuit with OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO, respectively, on June 27, 2013, Plaintiff AAOOOOOOO and the instant counterclaim were entitled to divorce lawsuit in the instant lawsuit for divorce.

E) On the other hand, on January 1, 2007, the FF’s 500 shares of capital gains (hereinafter “capital gains”) were recorded in the FF’s shareholder registry on January 1, 2007: (a) on January 14, 201, Y 10,250 shares of YF Y (hereinafter “capital gains”); (b) on January 14, 201, hereinafter “FF Y shares; (c) on January 14, 201, hereinafter “FF Y shares”; and (d) on April 13, 201, the FF shares were transferred from FF to Plaintiff BB, each of which was prepared on April 13, 2012, each of which was transferred to the FF 2, 201, each of which was transferred to Plaintiff 2, 201, each of which was transferred to Plaintiff 2, 201.

F) Therefore, through the transfer of the instant shares, the transfer of FF shares, and the return of shares to Plaintiff A, etc. of the CCC at the end of 2012, the shares in the capital gains (ratio) were recorded as Plaintiff AA5,900 shares (19.67%), as Plaintiff DD, 5,500 shares (18.33%), CCC 100 shares (0.33%) and FF0 shares (see Evidence 21-21). Meanwhile, FF was recorded as the auditor of YY from the time of the establishment of YY to March 23, 2012, as the auditor of YY from September 6, 2007 to March 22, 2012.

G) On the other hand, as of April 13, 2012, the date of each of the instant stock acquisition agreement, YY stock acquisition agreement, and FF stock acquisition agreement, and as of April 13, 2012, the agreement was formulated between Plaintiff A and Plaintiff B, etc. on the title trust of the instant shares (each of the agreement referred to as “B” refers to Plaintiff BB, DD, EE, and each of the instant agreements referred to as “the number of shares; hereinafter collectively referred to as “instant agreement”). Each of the above agreements was prepared separately between Plaintiff BB’s certificate of personal seal impression on March 23, 2012, DD’s certificate of personal seal impression, EE’s certificate of personal seal impression on March 27, 2012, and CE’s certificate of personal seal impression on March 20, 2012, and YE’s respective shares were not attached. However, each of the instant agreement was signed with YY on March 13, 2012.

H) The instant agreement is signed and sealed by the respective seals of Plaintiff BB, etc. on each side of the Plaintiff BB, etc. on the same day, while the instant agreement is written on the stock acquisition agreement, each of the names of Plaintiff BB, etc. is affixed to the respective names of Plaintiff B, etc. on each side of the Plaintiff B, etc. In addition, YY Stock acquisition agreement, which was written on the same day, is signed and sealed by the seals of the Plaintiff B, etc.

I) Each address of Plaintiff AA and FF in the instant stock acquisition agreement, YY stock acquisition agreement, and FF stock acquisition agreement are described as “OO-dong O-type OO-type OO-type O-type O-type O-type O-type O-type O-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-typeO-type.”

(j) DDR et al. was appointed as an intra-company director on March 22, 2012, and was registered as an intra-company director on April 2, 2012 in the corporate register of a trade-level, and DDR was also registered as an intra-company director on March 22, 2012 on April 2, 2012.

(k) On December 10, 2013, when the divorce lawsuit of this case was pending, Plaintiff AA demanded the Defendant to submit data for explanation as seen earlier, and around that time, Plaintiff AA returned the instant stocks transferred to DD, etc. under its own name.

(l) No one does not default national taxes from the time of establishment to April 18, 2014, and no one did not distribute the retained earnings so far even though they were transferred to OOO as of the end of 2011, OOOOO as of the end of 2012, and OOO as of the end of 2013. The net income for the year 2011 is OO, OOO, 2012 net income for the year 2012, OOO, and OO for the net income for the year 2013.

3) Determination

In light of the aforementioned legal principles, the facts and evidence as seen earlier, Gap evidence No. 19, Eul evidence No. 2,8, and Eul evidence No. 12 obtained by adding the overall purport of the pleadings to the following circumstances, the evidence submitted by the plaintiffs alone is insufficient to acknowledge that Plaintiff AA entrusted the ownership of the shares to Plaintiff BB, etc. for the purpose of preparing for the division of property due to divorce with FF without the purpose of tax evasion, and there is no other evidence to acknowledge otherwise. Furthermore, it is difficult to deem that Plaintiff AA entrusted the ownership of the shares to Plaintiff B, etc. for the purpose of preparing for the division of property by divorce with FF without the objective of tax evasion. Furthermore, it is difficult to deem that there was no tax evasion at the time of the title trust or at the time of the title trust in this case

A) The Plaintiffs asserts that the instant shares and the instant YB shares were in title trust. However, the instant agreement was drafted to the effect that “YB shares were in title trust for the purpose of defending property division.” On the other hand, such agreement was not formulated separately with respect to the instant YY shares. The purport of title trust of the instant Y shares transferred in the same manner as the title trust of the instant shares is not different from that of the instant Y shares. However, it is difficult to conclude that the instant agreement was not prepared with respect to the instant YB shares as to the purport of the same purport as the instant YB shares, in light of the fact that Plaintiff AA and Plaintiff B et al. were requested by the tax authorities to explain their face value as to the instant shares, and that it was difficult to view that the Plaintiff’s new YB shares were in title trust of the Plaintiff’s shares to be included in the Plaintiff’s YB shares at its face value as the Plaintiff’s new YB shares and its par value increase in the instant YB shares.

B) Although the agreement between the plaintiff A and F. on March 2012 is determined to be mixed, it is difficult to find out that the plaintiff A and F. on March 2012 entered the agreement in the agreement of this case as 20. However, according to the evidence No. 17, it is difficult to find that the plaintiff F. on June 17, 2012, entered the F.I.D. agreement of this case as 10 and the F.I.D. on June 17, 2012 and the plaintiff A.I.D. on March 15, 200, it is difficult to conclude that the plaintiff F.I.D. on June 17, 201, entered the agreement of this case as 200, the agreement of this case as 3rd, which was written by the plaintiff A.I.D. on June 1, 201, which was written by the plaintiff F.I.D. on June 1, 2012.

C) Although the instant agreement was made on the surface on the same date as the instant YY Stock Transfer Agreement, the address of Plaintiff AA is different from the instant YY Stock Transfer Agreement, and the instant YB Stock Transfer Agreement. In addition, the Plaintiff BB’s seal affixed on each of the above documents is different from each other, such as the seal impression design in the instant agreement and the instant YB agreement, etc. are affixed simply as a closed-down design. Accordingly, the Plaintiffs are more likely to recognize the existence of the instant agreement, rather than the Plaintiff AA and Plaintiff BB, etc., under the direction of Plaintiff AA as of April 13, 2012, the first written agreement between Plaintiff AA and Plaintiff BB, etc. as of April 13, 2012, and subsequent to the formation of the instant YY Stock Transfer Agreement with the help of its tax office, and subsequent preparation of the documents necessary for the instant YY Stock Transfer Agreement. However, the Plaintiff B and the Plaintiff BB, etc., prepared the instant agreement on the stock transfer.

D) Each certificate of personal seal impression (except for the certificate of personal seal impression ofCC; hereinafter the same shall apply) attached to the instant agreement was issued on the earlier date in light of the date of the formation of the instant agreement. Moreover, each of the above certificates of personal seal impression appears to have been issued on the same date as each certificate of personal seal impression submitted when DDR, etc. was registered as an internal director of the corporate register. Accordingly, each of the above certificates of personal seal impression was not for the instant agreement, but for each of the above certificates of personal seal impression issued for corporate register, but for the purpose of defending the Plaintiff’s divorce with FF. However, it is difficult to find that Plaintiff AA prepared for the instant agreement to change the title trust and Y executives of the instant agreement with FF, and there is no reason to request the Plaintiff to transfer property under the name of CCC for the purpose of preparing for the instant agreement to change the title trust agreement with FF.

E) The Plaintiffs asserts to the effect that “F shares were owned by Plaintiff AF and were not aware of the instant shares and transfer of FF shares and transfer thereof.” However, in light of the fact that FF’s signature was affixed on the FF’s report on capital gains tax (Evidence B) and that FF’s seal impression is affixed on the FFF’s transfer contract, it is difficult to readily conclude that FF was unaware of the registration of FF shares and transfer thereof. Furthermore, even if FF was not aware of the Plaintiff’s signature at the registry office’s entry of office and resignation, it is difficult to readily conclude that the Plaintiff’s assertion that FF’s transfer of shares and transfer of shares was difficult on the grounds that the FF’s signature did not appear to have been recorded on the Plaintiff’s own account of the fact that FFF’s transfer of shares and transfer of shares for reasons of difference of character between January 201 and the Plaintiff’s previous FFFF’s signature and transfer of shares.

F) The instant taxation disposition due to the title trust was issued to the same purport as the instant disposition against DD and EE on the same day other than the Plaintiffs. However, only the Plaintiffs raised an objection thereto, and the instant lawsuit was brought against the Plaintiff. As to the request for a request for a trial by the court of the relevant party, the Plaintiffs asserted that: (a) a certified tax accountant who was requested by the Plaintiff AA for a trial from the Plaintiff did not submit a written appeal to the Plaintiffs only and did not file a request for a trial against DD and EE; and (b) a certified tax accountant is expected to file a claim for damages against the said certified tax accountant. Such explanation by the Plaintiffs is difficult to readily accept.

G) Even if Plaintiff A had held 73.33% of the total shares of this case after this case’s transfer of shares, it is difficult to determine that the share ratio was 19.67% due to the transfer of shares (i.e.,, the previous Act prior to the amendment by Act No. 11845, May 28, 2013) under Article 39 of the former Framework Act on National Taxes and Article 47 of the former Framework Act on Local Taxes (amended by Act No. 11616, Jan. 1, 2013)’s status of oligopolistic shareholders and secondary taxpayers and the number of shareholders of the previous Local Tax Act (amended by Act No. 11617, Jan. 1, 2013) to escape the position of shareholders of this case’s deemed to have been 10 billion won since the date of the transfer of shares (see, e.g., Supreme Court Decision 2000, supra).

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed due to the lack of reason, and the judgment of the court of first instance is unfair with different conclusions, so the defendant's appeal is accepted, and all of the plaintiffs' claims are dismissed.