Scope of funeral expenses deducted from the value of inherited property;

Article 4 (1) 2 of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) provides that funeral expenses (in cases where funeral expenses are less than 2,00,000 won, it shall be 2,00,000 won) of an ancestor shall be deducted from the value of inherited property in calculating the taxable amount of inheritance taxes, and the detailed scope of such funeral expenses shall not be specifically limited to the scope of the expenses. Thus, funeral expenses shall be deducted from the value of inherited property in that they reduces the ability to pay inheritance tax due to inevitable expenses incidental to the commencement of inheritance, even though they are not the debts existing at the time of the commencement of inheritance, in light of social norms and morals, etc., the funeral expenses, funeral purchase and landscaping expenses, shall be deemed as the funeral expenses deducted from the value of inherited property.

Article 4(1)2 of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) (see current Article 14(1)2 of the Inheritance Tax and Gift Tax Act)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Doz., Counsel for plaintiff-appellant)

Plaintiff 1 and four others (Attorney Kim Young-young, Counsel for the plaintiff-appellant)

Head of Mapo Tax Office

Seoul High Court Decision 94Gu37310 delivered on January 22, 1997

The part of the lower judgment against the Plaintiffs is reversed and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. On the second and third grounds for appeal

Article 7-2 (1) of the former Inheritance Tax Act (amended by Act No. 5193, Dec. 30, 1996) provides that in cases where an ancestor disposes of inherited property before the commencement of the inheritance, the disposal proceeds may promote an unfair reduction of inheritance tax by donation or inheritance in cash, which is not easy to be exposed to taxation data, and thus, in order to prevent this, the tax authority has proved that there is an objectively unclear amount, unless the taxpayer proves that the amount has been inherited in cash, the tax authority shall include the amount in the taxable amount of inheritance and exclude the application when the heir proves the purpose of use (see, e.g., Supreme Court Decision 95Nu13821, Aug. 23, 1996). Even if the disposal proceeds of the property was clearly determined to have been paid to a third party, if the existence of an obligation to the third party is not clearly revealed, it shall not be deemed that the proceeds have been appropriated for the repayment of the genuine obligation, and its use is objectively included in the taxable amount of inheritance tax (see, 195Nu 196, etc.295.

According to the reasoning of the judgment below, the court below held that each item claimed by the plaintiffs that was disbursed from the disposal price of the real estate in this case shall be included in the taxable amount of inheritance taxes because it is difficult to recognize the fact of disbursement itself or even if the fact of disbursement was recognized, its use cannot be objectively obvious since it cannot be deemed to have been disbursed from the disposal price of the real estate in this case, in light of relevant evidence and the rental income that the deceased non-party, who is the deceased, was previously acquired from the disposal price of the real estate in this case. In light of the records and the above legal principles, the above recognition and determination of the court below is just, and there are no errors in the misapprehension of legal principles

2. On the first ground for appeal

Article 4 (1) 2 of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) provides that funeral expenses (in cases where funeral expenses are less than 2,00,000 won, it shall be 2,00,000 won) of an ancestor shall be deducted from the value of inherited property in calculating the taxable amount of inheritance taxes, and the detailed scope of such funeral expenses shall not be specifically limited to the scope of the expenses. Thus, funeral expenses shall be deducted from the value of inherited property in that they reduces the ability to pay inheritance tax due to inevitable expenses incurred in the commencement of inheritance, even though they are not the debts existing at the time of the commencement of inheritance, in light of social norms and morals, etc., such funeral expenses shall be deemed to constitute funeral expenses that are deducted from the value of inherited property (see Supreme Court Decision 97Nu669, Nov. 14, 197).

According to the reasoning of the judgment below, the court below acknowledged that the above deceased's expenses were paid in 24,80,000 won with the purchase and landscaping expenses, and the installation expenses of stone monuments. Since the above expenses cannot be deemed to have been disbursed from the disposal proceeds of the real estate in this case, the court below judged that the above expenses should be included in the taxable amount of inheritance taxes pursuant to Article 7-2 (1) of the Inheritance Tax Act, as the use of the real estate in this case is not objectively clear, and did not determine whether they can be deducted as funeral expenses under Article 4 (1)

However, according to the records, in the court below's decision, the plaintiffs asserted that the above expenses should be deducted as funeral expenses under Article 4 (1) 2 of the Inheritance Tax Act, not from the disposal price of the real estate in this case, because the expenses for purchase and landscaping of the deceased, and the expenses for installation of stone, were paid from the disposal price of the real estate in this case. Thus, it is obvious that the equivalent amount should not be included in the taxable amount of inheritance taxes because the objective purpose of use is obvious, but from the funeral expenses under Article 4 (1) 2 of the Inheritance Tax Act. Accordingly, the court below erred in failing to deliberate and decide on the plaintiffs' assertion that the above expenses should be deducted as funeral expenses under Article

3. Therefore, the part of the judgment below against the plaintiffs is reversed, and that part of the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Yong-hun (Presiding Justice)