Whether the donee may be deemed to have taken over the obligation when a onerous donation is made between lineal ascendants and descendants.

In general, even if a third party has received a gift from a lineal ascendant of a real estate on which the right to collateral security was established, the beneficiary bears the burden of proving that the beneficiary has discharged the obligation on the collateral security, or has performed the obligation by his own presence.

Article 47 of the Inheritance Tax and Gift Tax Act

Article 36 of the Inheritance Tax and Gift Tax Act

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of gift tax of KRW 54,553,170 against the Plaintiff on May 4, 2006, revoked the part exceeding KRW 47,524,190 (including the part exceeding KRW 7,028,980).

1. Details of the instant disposition

A. On June 26, 2003, the Plaintiff entered into a contract between the father’s father’s father’s father’s father’s ○○○○-dong 4, 00 m2, and 51 m2,02.2 m2, and 3 m2,000 m2,000 m2,000 m2,000,000, and completed the registration of ownership transfer accordingly on the same day.

B. On July 2003, when the Plaintiff reported gift tax to the Defendant, it assessed 445,129,629,629 won (part 1/2:39,323,00 won + 47,806,629 won for the portion of the building: 47,806,629 won) of the real secured debt amount of the right to collateral security against ○ Bank (hereinafter “○○ Bank”) established with respect to the instant real property from the above appraised value, and then deducted 17,50,000 won, out of 3.5 million won for the actual secured debt amount of the right to collateral security against ○ Bank (hereinafter “the debt of this case”), 270,129,629 won, which was deducted from the value of the lineal ascendant and descendant and deducted 30,000,000 won from the gift tax amount of KRW 30,240,329,325,329,329,325,29.

C. However, on May 4, 2006, the Defendant: (a) calculated the amount of KRW 445,129,629, which was not deducted from the assessed value of the instant real estate on the ground that the Plaintiff cannot be deemed to have taken over KRW 175,00,00 among the instant debt from Song○○○; and (b) notified the Plaintiff of the imposition of KRW 441,01,776,50, which was calculated by deducting KRW 30,000,00 from the assessed value of the instant real estate on December 19, 201, ○○○○○○○○○○○○-gun, which was donated by the Plaintiff on December 19, 2001, 1/27-1, and KRW 25,83,057, which was added to the taxable value of the instant real estate; and (c) imposed the amount of gift tax calculated on the Plaintiff as the tax base; and (d) additionally imposed the amount of KRW 3423,233353,5375

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 and 2, Gap evidence No. 3-1, 2, Gap evidence No. 4, Gap evidence No. 6, Eul evidence No. 1 and 2, and the purport of the whole pleadings

2. The legality of disposition.

A. The plaintiff's assertion

While the Plaintiff received the instant real estate as a gift, at the same time, took over KRW 175 million from among the debt owed to the ○○○○○○○ bank, which was established as a collateral for the instant real estate, and repaid the principal and interest solely with the Plaintiff’s income, it is unlawful that the Plaintiff did not deduct the amount of the instant debt in calculating the taxable value of the gift tax on the instant real estate. Moreover, the donor made a voluntary declaration of capital gains tax by having the amount of the debt already borne as capital gains, and it is unlawful for the Plaintiff, who is a donee, to impose gift tax on the said portion.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On June 19, 2003, ○○○ extended a loan of KRW 350 million from ○○ Bank, and on the same day set up a collateral with the maximum debt amount of KRW 455,00,000 for the instant real estate.

(2) On June 26, 2003, after the day, Song○○ entered into a contract to donate 1/2 shares of the instant real estate to his own Plaintiff and Song○○○, one week after the day, and the registration of ownership transfer was completed on the same day. However, in the gift contract entered into at the time, it stated that “the donee bears the obligation for the amount of KRW 350,000,000 for the actual obligation of KRW 455,000 for the maximum amount of the claim registered with No. 35289 on June 19, 2003.”

(3) Even after the above donation contract and ownership transfer registration, the name of debtor of the above right to collateral security has not been changed, and the registration of change of the right to collateral security was also made on March 8, 2006, after the notice of the investigation results on the gift tax of this case (the date of February 21, 2006).

(4) The interest on the debt of this case was withdrawn from the account in the Plaintiff’s name (Account Number: 322-12-2****) and the total amount of KRW 164,00,000 was repaid for 89,000 on November 11, 2003 and KRW 164,00,000 on November 11, 2004. The Plaintiff did not present any particular data on the source of 89,00,000,000, which was repaid on December 11, 2003.

(5) Meanwhile, among the principal of KRW 75,00,000 repaid on November 11, 2004, KRW 51,000 was withdrawn from the Plaintiff’s account under the Plaintiff’s name. The amount of KRW 4,700,000, including KRW 18,800,000, KRW 6,600,000, KRW 3,300,000 from ○○ Trade as salary, and KRW 8,580,00,00, KRW 580,000 from ○○○○○, immediately before the repayment of the loan.

(6) The Plaintiff’s representative ○ trade is a deficit corporation for three consecutive years, and the Plaintiff’s annual salary received from the said company is reported to be KRW 24,00,000,000 per year. Meanwhile, the Song○○ operated a pharmacy at ○○○-dong 1, ○○○-gu, and reported that 484,40,000 won in the year 2003, and 514,610,000 won in the year 2004.

Facts without dispute over recognition, Gap evidence 7, Eul evidence 3, Eul evidence 4-1, 2, Eul evidence 5-13, and the purport of the whole pleadings

D. Determination

(1) In general, even if real estate which was established as a collateral in the third party’s future was donated from a lineal ascendant, it cannot be deemed that the donee took over the collateral right immediately as a discharge, and thus, it cannot be deemed that the donee bears the obligation deducted from the value of the donated property, i.e., the fact that the donee actually bears the obligation with the donor’s obligation. In such a case, the burden of proving that the donee took over the collateral right as a discharge or performed the obligation with the donee’s own obligation after the discharge is borne by the donee (see Supreme Court Decision 99Du12168, Mar. 24, 200).

However, as seen above, the obligor on the registration of the right to collateral security still had been Song○ for a long time after the donation contract was concluded, and the Plaintiff and Song○○○ received 1/2 each of the obligations of this case from the Plaintiff and Song○○. The Plaintiff did not bear 1/2 each of the principal and interest in repaying the principal and interest, and the source of the funds repaid as above is not clear, and Song○ bears the instant obligation from the bank immediately before the donation of the instant real estate, and the specific source of the loan was not clear, and the Defendant did not pay 89,00,000 won in lump sum at 6 months only after the donation was made. In light of the above, it is difficult to deem that the Plaintiff actually received 1/2 of the instant obligation from Song○○○, or paid 1/2 of the instant obligation with the funds of the principal and interest, there is no evidence to acknowledge this otherwise.

(2) In addition, since gift tax and capital gains tax vary between the requirements, timing, and taxpayers for the establishment of tax liability, each tax authority shall make an independent decision in accordance with each taxation requirement, and if the tax authority impose each disposition, it is not possible to impose both taxes unless there are any special provisions excluding overlapping application (see Supreme Court Decision 98Du11830, Sept. 21, 199). If Song○ paid the capital gains tax, and the gift tax imposition disposition against the Plaintiff against the Plaintiff is not a double taxation as a matter of course, so the Plaintiff’s assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

Related Acts and subordinate statutes

Article 47 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of December 30, 2003) (amended by Act No. 7010 of December 30,

(1) The taxable amount of gift taxes shall be the amount obtained by deducting the amount received by the donee from the aggregate of the donated property under the provisions of Articles 31 through 45 as of the date of donation, which is the debts (including the debts prescribed by the Presidential Decree, such as debts, etc.

(3) In the application of the provisions of paragraph (1), with respect to an onerous donation between spouse, or between lineal ascendants and descendants (including the cases presumed to be a donation under Article 44), even if the donee takes over the obligation of the donor, the donee shall be presumed not to have taken over the obligation of the donee: Provided, That this shall not apply in case where the amount of the obligation concerned is objectively recognized under the conditions as prescribed by

Article 36 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18989 of Aug. 5, 2005) (amended by Presidential Decree No. 18989 of the

(1) The term “liability as prescribed by the Presidential Decree” in Article 47 (1) of the Act means the relevant rental deposit in case where the donor leases the relevant property to another person.

(2) The term “where it is objectively recognized under the conditions as prescribed by the Presidential Decree” in the proviso of Article 47 (3) of the Act means the case that is proved under one of the subparagraphs of Article 10 (1).

Article 10 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

(1) The term “those proved by the method prescribed by the Presidential Decree” in Article 14 (4) of the Act means those proved by one of the following subparagraphs, in fact by the inheritor’s debts at the time of the commencement of inheritance:

1. Documents confirming that debts owed to the State, local governments and financial institutions are debts owed to such institutions;

2. Debt obligations owed to any person other than those under subparagraph 1, shall be verified by a contract for debt-bearing, a creditor's certificate, documents evidencing the establishment of security and the payment of interest, etc.

(2) Financial institutions referred to in paragraph (1) 1 and Article 15 (2) of the Act mean financial institutions referred to in subparagraph 1 of Article 2 of the Act on Real Name Financial Transactions and Guarantee of Secrecy.