early 2010west2042 ( December 29, 2010)

Title trust is not applicable to the disposal of shares after the acquisition of shares and the process of settlement of accounts;

In full view of the circumstances leading up to the difference between the actual owner of shares and the nominal owner, and the actual disposition of shares after the acquisition of shares, and the process of settlement of the price therefor, even if the actual owner and the nominal owner are different, it cannot be deemed that the title trust was made merely by itself, and it is reasonable to deem that one of the fund investors was allocated in the name of the Plaintiff, who is the spouse,

2011Guhap7762 Revocation of Disposition of Imposition of Gift Tax

XX

Head of Guro Tax Office

June 17, 2011

August 26, 2011

1. The Defendant’s disposition of imposition of KRW 111,434,340 against the Plaintiff on April 6, 2010 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

The following facts are either disputed between the parties, or acknowledged in full view of the purport of the whole arguments in Gap evidence 1, 2, 4, Eul evidence 1, Eul evidence 2-1, and Eul evidence 2-2:

A. From August 25, 2009 to December 1, 2009, the director of the Seoul Regional Tax Office entered into an agreement with the representative of △△ Investment Co., Ltd. (hereinafter referred to as △△△△△), which is a corporation listed on KOSDAQ, to conduct an integrated corporate tax investigation on the company XX (the former trade name before alteration: OO; hereinafter referred to as 'the non-party company') and, as a result, the non-party company took out new stocks equivalent to 47,600 shares per share in the third party allocation method around December 2005 to 4,160 won, the non-party company, a major shareholder of the non-party company (hereinafter referred to as '△△△△△△△), △△△△, a representative of △△△△ Investment Co., Ltd. (the representative of △△, hereinafter referred to as △△△△△), and △△△△, a representative of △△△△△, a representative of 000 investors or 40.

B. Accordingly, the director of the Seoul Regional Tax Office, while participating in the above capital increase with new shares, deemed that the above new shares were trusted to the Plaintiff, etc. by being allocated 405,600 won in the name of third parties such as the Plaintiff, etc., and applied Article 45-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”) and calculated the amount calculated by multiplying the number of shares issued by the Plaintiff, etc. as of December 16, 2005 by the value of donated shares of KRW 16,259, which is the market price of the non-party company’s shares as of December 16, 2005 (in case of the Plaintiff, the value of donated shares is 390,216,000 won (= 16,259,X24,00 won), and the Defendant notified the taxation data to the Defendant, etc.

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on May 27, 2010, but the Tax Tribunal dismissed the Plaintiff’s claim on December 29, 2010.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

ThisA was allocated the instant shares in the name of the Plaintiff, the mother, for the purpose of lending the new shares subscription fund to the non-party company to participate in the capital increase by issuing new shares and securing the return of the loan. However, the Defendant, without any grounds, deemed that the instant shares that the △△△ should have been allocated under the name of the Plaintiff pursuant to the title trust agreement concluded between the Plaintiff and the △△△ was allocated, and thus, imposed gift tax on the Plaintiff by applying Article 45-2 (1) of the former Inheritance Tax

B. Relevant statutes

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

(c) Fact of recognition;

The following facts are either disputed between the parties, or acknowledged by Gap evidence Nos. 2, 3, and 2-1 through 6, and Eul evidence No. 3 in full view of the purport of the whole pleadings:

(1) Around December 2005, the non-party company intended to provide new shares equivalent to 477,600 shares per share to 4,160 won per share, and △△△, the major shareholder of the non-party company, entered into an agreement with △△△△ to provide funds to participate in the above new shares offering in early December 2005, on the condition that △△△△ will pay the amount equivalent to 4% of the investment amount as prior interest, △△△ will pay to △△△△△ in addition to the above interest, the amount equivalent to 3% of the investment amount collected as service fees to △△△△△△ (hereinafter referred to as the “instant funding agreement”). The main contents of the said agreement are as follows.

(2) After December 8, 2005, △△△ concluded an investment agreement on the condition that 11 investors, including LeeA, who is the Plaintiff’s father’s father, are recruited in accordance with the instant financing agreement and that 4% of the investment amount is paid among each of them as interest. The main contents of the agreement are as follows.

(3) When the 11 investors, including thisA, entered into the instant investment agreement with △△△△, and raised a total of KRW 1,687,296,00 with the subscription fund for new shares in the non-party meeting, △△△△ was issued cashier’s checks equivalent to the amount equivalent to 7% of the subscription fund raised from △△△ for service commission and interest, and the amount equivalent to 338,00,000 won for the new shares raised from △△ pursuant to the instant investment agreement, and then issued the said cashier’s checks to the investors in the amount equivalent to 4% of the subscription fund raised as interest pursuant to the instant investment agreement and the amount equivalent to

(4) Meanwhile, △△△ was allocated 400 shares out of 477,600 shares out of 1,687,296,000 shares for subscription to new shares raised in accordance with the instant financing agreement and investment agreement to investors or a third party designated by the Nonparty Company, who participated in the capital increase issued on December 9, 2005, to be issued by the Nonparty Company, under the name of investors or the third party designated by the Nonparty Company. The specific details are as follows.

(5) Subsequent to this, 11 investors, including thisA, sold 405,60 new shares allocated five times from December 23, 2005 to February 1, 2006, to 7,425,078,440 won, after deducting KRW 1,687,296,00 of the invested principal, and then returned cashier's checks worth KRW 5,737,782,440 of the remaining sales amount and KRW 338,000 of the secured money to △△△△△△, which have been paid five times from February 23, 2005 to February 1, 2006.

D. Determination

(1) In order to establish a deemed donation of title trust for shares pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act, a transfer of title to the title holder should be made in the future under an agreement between the actual owner of the shares and the title holder, namely, an agreement on the nominal trust or communication. Thus, if a change of title to the title holder was made without an agreement on the nominal trust, the said provision may not be applied (see Supreme Court Decision 2007Du15780, Feb. 14, 2008). In addition, in cases where a title of shares owned by an obligor is transferred to the creditor for the purpose of collateral security for a claim, the said provision does not merely have the nominal ownership of the shares for the debtor, but has a security right for his/her own interest. Thus, it cannot be deemed that there exists an agreement on the deemed donation of title trust under

(2) In light of the above legal principles, in full view of the circumstances, such as the background leading up to the difference between the actual owner of the instant shares and the nominal owner, and the disposal of the actual shares after the acquisition of the shares, as seen below through the overall purport of the arguments, as seen earlier, and the process of settlement of accounts, etc., △△△ cannot be deemed to have entrusted the instant shares to the Plaintiff, even if the actual owner of the instant shares and the Plaintiff, who is the nominal owner, are different, and there is no evidence to acknowledge otherwise, and it is reasonable to deem that △△△ was allocated the instant shares in the name of the Plaintiff for the purpose of transfer to secure the return of the principal and interest of his investment. Accordingly, the provision on deemed donation under Article 45-2(1) of the former Inheritance Tax and Gift

(A) The instant financing agreement between △△△ and △△△, states that, until △△△ is returned with the principal and interest of the investment funds raised by △△△△△, △△△△ shall have a cashier’s check issued and kept (Articles 2(5) and 5(2)), △△△△ shall also have been allocated in the name of △△△△, and △△△ shall have the right to new stocks and the preemptive right to new stocks in custody as security (Article 6(11)), and where the total market price of new stocks and the cashier’s check offered as security does not exceed 150% of the investment funds raised by △△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△, in the event that the total market price of new stocks allocated and the cashier’s check offered as security does not provide additional security, △△△△△△△△△△ has the right to receive the principal and interest of the investment funds.

(B) In this case’s investment agreement between △△△ and investors, △△△△△ stated that in order to secure investors’ principal and interest on investment, it shall issue cashier’s checks equivalent to 20% of the investment funds to investors (Article 2), and that in the event △△△△ fully repaid investors’ investment stocks, investors shall return the principal food and the goods secured (Article 8). According to this, △△△△△, when entering into the instant investment agreement with investors, it grants investors the same authority as the securities given prior to the issuance of the instant investment agreement with the investors and re-granting the same authority as the securities granted

(C) In fact, investors, such as thisA, received interest on the agreed interest rate of KRW 100,00,000 through KRW 200,000 pursuant to the instant investment agreement, and invested funds in the amount of KRW 100,000 through KRW 200,00,000, and then sold the new shares issued by the non-party company under the name of their or any third party designated by them, and returned the total sales amount of the remaining sales amount after deducting the investment principal from △△△△. △△ also, pursuant to the instant investment agreement, recruited investors pursuant to the instant investment agreement and received the interest and service fees on the arrangement from △△△

(D) At the time, the largestB, the representative of △△△, was subject to the tax investigation in relation to the instant case, and △△△, was in charge of mediating the mutual between △△ and investors. However, △△△, the actual ownership of new shares acquired through the capital increase for the instant consideration was made at the △△△△, but the investors stated to the effect that, for the purpose of securing the return of the investment amount, the investors would make payments for the capital increase in their names to distribute new shares, and that some investors would know that they would well have made payments for the capital increase in their names, and that △△△△△ employee KimCC, who was in charge of the said business at the time, made a statement to the effect that the investors

(E) On the other hand, △△△ or △△△△ and investors do not seem to have formed a personal trust relationship to the extent that only the title of shares owned was entrusted, and there is no clear ground to deem that there was an agreement among them to make a nominal deposit of new shares issued by the non-party company.

(F) Meanwhile, even though shares can be the object of security by establishing a pledge right, the creation of a security right by means of security by transferring the name of shares to a security right is much more easy in terms of securing and recovering a security right. Therefore, from the standpoint of a security right holder, it seems that there is more incentive to establish a security right rather than establishing a pledge right on shares.

(3) Furthermore, even if thisA was allocated new shares for the purpose of transfer by means of transfer, as seen above, under the name of the Plaintiff, this would eventually result in the title trust of thisA to the Plaintiff, and even in the case of title trust for the right of transfer by means of transfer other than ownership, the provisions of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act regarding whether the provision on deemed donation under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act can be applied to the case where the actual owner and the nominal owner are different in the case where the actual owner are the former owner and the nominal owner are the other in the case where the actual owner are the former owner and the nominal owner are the former owner. The purpose of the above provision is to effectively prevent the act of tax avoidance by using the title trust system, thereby recognizing the exception to the real principle of taxation (see, e.g., Supreme Court Decision 2003Du13649, Dec. 23, 2004).

It cannot be interpreted that the actual owner and the nominal owner are included in the "where the nominal owner are different."

Therefore, it is reasonable to view that even if thisA has held a title trust on the instant shares issued by the Plaintiff, gift tax may not be levied on the Plaintiff by applying the provisions of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act.

(4) The theory of lawsuit

The Defendant’s disposition of this case, based on the premise that △△ entrusted the instant shares to the Plaintiff, is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.