Where donated property is added within a certain period of the original inherited property as an object of inheritance tax, the method of deducting the amount of gift tax on donated property when inheritance tax is imposed

Where the same property is subject to inheritance tax and gift tax by adding donated property within a certain period of time to the inherited property as an object of inheritance tax, even if the amount of gift tax or gift tax to be paid for the donated property exceeds the amount of inheritance tax calculated on the inherited property including the donated property which is added with the amount of gift tax or the amount of gift tax to be paid, the portion corresponding to double taxation shall be deemed as the portion equivalent to the percentage of donated property among inherited property in the amount equivalent to the amount calculated on the inherited property, not the amount equivalent to the amount calculated on the inherited property, but the amount calculated on the basis of the amount calculated on the inherited property, inasmuch as the Inheritance Tax Act of Korea differently prescribes the calculation method of the tax base, such as the amount calculated on the inheritance tax and gift tax rate system and the scope of various deductions. Such tax credit for gift is equivalent to the principle of fair taxation and substantial taxation. Thus, if a donee of donated property added is a successor, it shall be subject to the proviso to Article 18 (3) of the former Inheritance Tax Act (amended by Act No. 4410, Nov. 30,

Articles 18(3), (4), and 4 of the former Inheritance Tax Act (amended by Act No. 4410 of Nov. 30, 1991)

Supreme Court Decision 77Nu304 Decided June 12, 1979 (Gong1979, 12044) Supreme Court Decision 86Nu199 Decided December 23, 1986 (Gong1987, 249)

Plaintiff

The director of the tax office

Seoul High Court Decision 95Gu17658 delivered on October 24, 1995

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

We examine the Plaintiff’s ground of appeal.

Article 18 of the Inheritance Tax Act (amended by Act No. 4410 of Nov. 30, 1991; hereinafter the same shall apply) provides that in case where the donated property is added as object of inheritance tax for a certain period prior to the commencement of inheritance, in order to prevent double taxation by being subject to gift tax and inheritance tax, the amount of the gift tax (referring to the amount equivalent to the calculated amount of gift tax on the donated property at the time of donation) on the donated property added pursuant to the provisions of Article 4 shall be deducted from the calculated amount of inheritance tax: Provided, That in case where the donee of the donated property is the heir or testamentary donee as provided in paragraph (1), it shall be deducted from the calculated amount of inheritance tax to be paid by each donee, and in case where the amount of gift tax to be deducted in case of paragraph (3) exceeds the calculated amount of inheritance tax, it shall be deemed that there is no amount in excess. Accordingly, in case where the donee of the donated property added to the method of deduction of the amount of gift tax is the heir or testamentary donee as provided in paragraph (1).

Even in cases where the amount of gift tax or the amount of gift tax to be paid for the donated property exceeds the amount of inheritance tax calculated on the inherited property (including the donated property added to the original inherited property; hereinafter the same shall apply), the portion corresponding to double taxation is not equivalent to the amount of gift tax calculated on the inherited property, but is merely equivalent to the percentage of donated property among inherited property in the amount equivalent to the calculated amount of inheritance tax on the inherited property, in addition to the amount equivalent to the calculated amount of gift tax on the inherited property, so long as the Inheritance Tax Act differently provides for the calculation method of the tax base, such as the inheritance tax and gift tax rate system and various scope of deductions, the portion corresponding to the calculated amount of gift tax on the inherited property. The above tax credit of gift is in accord with the principle of fair taxation and substantial taxation. If the donee is an heir of the donated property added to the donated property, the amount equivalent to the calculated amount of gift tax on the donated property should be deducted only within the limit of the amount of inheritance tax to be paid by the donee, and thus, it cannot be deemed contrary to the principle of fair taxation and fair taxation.

On the contrary, in case where, even if a witness of donated property added to inherited property is a successor, the amount of gift tax already paid for the donated property exceeds the amount of inheritance tax calculated on inherited property, the plaintiff's assertion that the proviso of Article 18 (3) of the above Act should not be applied, but should be applied under certain conditions, or the main sentence of the above Article should be applied

The judgment below to the same purport is just, and there is no error in the misapprehension of legal principles as to the application of the main sentence and proviso of Article 18 (3) of the same Act (the method of deduction of donated tax amount). There is no ground for argument

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 Ahn Yong-sik (Presiding Justice)