Plaintiff

The Director of the Pacific District Office

Seoul Administrative Court Decision 2010Guhap9129 decided April 30, 2010

September 29, 2010

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The defendant's disposition of designating a joint and several taxpayer on December 24, 2004 against the plaintiff on August 3, 2009 is revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On July 26, 200, the Plaintiff, along with Nonparty 2, his mother, and Nonparty 1, who omitted, completed the registration of ownership transfer for each of 2/7 shares, on the ground of the inheritance commenced by Nonparty 4, who was the father of the Plaintiff, on June 4, 2000, due to the inheritance commenced by Nonparty 4, who was the father of the Plaintiff.

B. On September 27, 2002, Nonparty 2 completed the registration of ownership transfer for the Plaintiff and Nonparty 1’s share (4/7 share) of the instant land as the legal representative of the Plaintiff and Nonparty 1, who are a minor, on September 27, 2002.

C. On December 24, 2004, Nonparty 3 completed the registration of ownership transfer made on December 24, 2004 with respect to the above shares on the land of this case to Nonparty 2 and Nonparty 1, each of 2/7 shares, respectively, on the grounds of sale on December 24, 2004 (hereinafter “the instant shares”).

D. When Nonparty 3 did not report the transfer income tax related to the sale and purchase of the instant land on July 2008, the Defendant: (a) deemed that the transfer of the instant shares was actually a donation to Nonparty 3 and Nonparty 2; and (b) on June 5, 2009, the Defendant imposed KRW 77,109,110 on Nonparty 2, who was the cause of taxation, on December 24, 2004.

E. Upon the auction of the instant land on August 3, 2006, the Defendant: (a) determined that it is difficult to secure tax claims; (b) on August 3, 2009, the Defendant designated the Plaintiff as a joint obligor for tax payment with respect to KRW 80,347,680 (Gift 77,109,110 + additional 3,238,570) of the gift tax on Nonparty 2 pursuant to Article 4(4) of the Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Gift”).

F. The Plaintiff dissatisfied with the instant disposition and filed a request for examination with the National Tax Service on September 21, 2009, but was dismissed on November 18, 2009.

[Reasons for Recognition] Evidence Nos. 1 through 4, Evidence No. 1-1 of Evidence No. 1, and the purport of the whole pleadings

2. Whether the dispositions in this case are appropriate;

A. The plaintiff's assertion

Although Nonparty 2 obtained a loan from a financial institution as collateral and tried to build a new building on the ground, it cannot obtain a loan under the name of the minor Plaintiff and Nonparty 1, the legal representative, who held the title trust with the Plaintiff and Nonparty 1’s share in the instant land. After that, Nonparty 2 was subject to a return of the title trust share created by the dispute with Nonparty 3, and unlike Nonparty 1 who became adult, the Plaintiff still could not obtain a loan from a minor and still transfer the instant share to Nonparty 2.

Although Nonparty 2 transferred the Plaintiff and Nonparty 1’s share to Nonparty 3, both of the Plaintiff and the Plaintiff’s transfer of the instant share from Nonparty 3 constituted a title trust. The process was conducted by Nonparty 2, who is a person with parental authority, without the Plaintiff’s consent. Thus, it is null and void as an act of conflicting interest between the person with parental authority under Article 921(1) of the Civil Act and the person with parental authority. Therefore, the instant disposition that deemed the Plaintiff’s transfer of the instant share to Nonparty 2 as a gift is unlawful.

B. Relevant statutes

Attached Table 1 is as stated in the "relevant statutes".

C. Determination

1) Nonparty 2’s transfer to Nonparty 3 of the Plaintiff and Nonparty 1’s shares

A) In full view of the purport of the entire pleadings, the following facts are recognized in the statements in Gap evidence Nos. 1, 4, 5, and 6.

(1) On September 10, 202, Nonparty 2 introduced a construction business operator from Nonparty 3 and decided to newly construct the instant building on the instant land, and agreed to obtain a loan for construction funds. Nonparty 2, as the legal representative of the Plaintiff and Nonparty 1, who is a minor, prepared a real estate sales contract ( September 1, 2002) that sells the Plaintiff and Nonparty 1’s share in the instant land for purchase price of KRW 460,000,000. On September 27, 2002, Nonparty 2 completed the registration of ownership transfer of the said share (4/7 share) without receiving the purchase price from Nonparty 3. Nonparty 2, as the National Agricultural Cooperative Federation for the instant land, the debtor, on October 10, 202, completed the registration of creation of a mortgage on the instant land with the maximum debt amount of KRW 1,040,000,000, and the debtor completed the registration of creation of a maximum debt amount of KRW 300,000,700.

(2) On July 1, 2009, the head of Seo-gu Daejeon District Office notified that the Plaintiff violated the Act on the Registration of Real Estate under Actual Titleholder’s Name (wholly amended by Act No. 10203, Mar. 31, 2010; hereinafter “Real Estate Real Name Act”), and imposed a penalty surcharge of KRW 31,830,00 on July 1, 200. Since Nonparty 2 arbitrarily held title trust on the instant shares, the Plaintiff requested revocation of the imposition of a penalty surcharge. However, on December 8, 2009, the Daejeon District Administrative Appeals Commission of Daejeon District requested revocation of the imposition of a penalty surcharge. On December 8, 2009, Nonparty 2, a legal representative, title trust of the instant shares, and dismissed the imposition of a penalty surcharge imposed by reducing the tax amount by 50%.

B) Article 921(1) of the Civil Act (wholly amended by Act No. 7428 of Mar. 31, 2005) provides that “A person with parental authority who is a legal representative and his/her person shall request the court to appoint a person with parental authority as a special representative in performing an act of conflicting interest between the person with parental authority and his/her person.”

The phrase “this act” stipulated in Article 921 of the Civil Act refers to an act that is likely to cause conflict of interest between a person with parental authority and a person with parental authority by its objective nature, and it does not ask whether there is any actual conflict of interest as a result of the intention held by a person with parental authority or the act (see Supreme Court Decisions 91Da32466, Nov. 26, 1991; 92Da54524, Apr. 13, 1993).

C) The act of Nonparty 2, a person with parental authority of the Plaintiff, transferred the instant shares to Nonparty 3, one’s own partner, is not an act of conflicting with the interest between Nonparty 3 and the Plaintiff as well as between Nonparty 2 and the Plaintiff. The act of transferring the instant shares to Nonparty 3 does not become null and void under Article 921(1) of the Civil Act.

2) The act that Nonparty 3 transferred the instant shares to Nonparty 2 and whether the instant disposition is appropriate

A) The following facts are acknowledged in light of the overall purport of the arguments in Gap evidence Nos. 1, 3, 4, 5, Eul evidence Nos. 1, 1-2, and Eul evidence No. 2.

(1) On December 24, 2004, Nonparty 3 prepared a real estate sales contract (as of December 24, 2004), which constitutes a real estate sales contract (as of December 24, 2004), the seller, Nonparty 2 and Nonparty 1, and the purchaser, for the purchase price, KRW 640,000,00, and completed the registration of ownership transfer to Nonparty 2 without receiving the purchase price, and to transfer the remaining shares to Nonparty 1.

(2) As Nonparty 3 did not report the transfer income tax even after the transfer of ownership as described in the above paragraph (1), the head of Seoul Central District Tax Office notified Nonparty 2 that the instant shares were donated to Nonparty 2 by conducting a field investigation of the transfer income tax on July 2008.

(3) On June 5, 2009, the Defendant: (a) received the gift from Nonparty 2 on the gift from the Plaintiff; and (b) imposed a gift tax on KRW 77,109,114 1); and (c) on August 2, 2006, the Plaintiff did not raise any objection, even though all of the instant land, including the instant share, was sold at a voluntary auction.

B) Article 2(3) of the Gift Tax Act provides that “The term “donation” means a free transfer (including transfer at a remarkably low price) of any tangible or intangible property (including transfer at a remarkably low price) in which economic values can be calculated, directly or indirectly, to another person, regardless of the name, form, purpose, etc. of the relevant act or transaction, or an increase in property values of another person by contribution.” Article 2(4) of the Inheritance Tax Act provides that “Where it is deemed that inheritance tax or gift tax has been unjustly reduced by indirect method via a third party, or by a method involving two or more acts or transactions, it shall be deemed that a party has directly traded or that the provision of paragraph 3 shall apply by deeming that such act or transaction is a single act or transaction in succession.”

C) According to the above facts, the transfer of the instant shares to Nonparty 2 via Nonparty 3 without restoring to the Plaintiff is deemed a single act or transaction pursuant to Article 2(4) of the Inheritance Tax Act, and thus, the Plaintiff’s transfer of the instant shares to Nonparty 2 without compensation (in the Plaintiff’s assertion, since the instant shares were each nominal trust to Nonparty 3 and 2, the registration in the name of Nonparty 3 and 2 is null and void. Thus, even if the instant shares still owned by the Plaintiff and it is not deemed a gift to Nonparty 2, there is no evidence to deem that the instant shares are still owned by the Plaintiff to be a title trust. Nonparty 3 is registered under the Real Estate Act, and thus, it is null and void pursuant to the Real Estate Act, but it is null and void pursuant to Article 4(3) of the same Act, and thus, it becomes null and void.)

D) The instant disposition issued by the Defendant is lawful.

3. Conclusion

The plaintiff's claim is without merit. The judgment of the court of first instance is unfair with different conclusions. The judgment of the court of first instance is revoked, and the plaintiff's claim is dismissed.

[Attachment-Related Acts and subordinate statutes omitted]

Judges Kim Jong-dae (Presiding Judge)

1) The final tax amount of KRW 47,660,00 [318,30,000 in the taxable value of gift tax - the deduction of lineal ascendants and descendants - the deduction of KRW 30,00,000 in the taxable value of gift tax x 20%] £« the additional tax of KRW 9,532,00 in the fraudulent filing of a return + the additional tax of KRW 19,917,14 in the fraudulent filing of a return.