early 2013 Middle 1407 ( December 27, 2013)

No gift tax may be imposed if the cause of stock donation is fraudulent;

Since the Plaintiff was subjected to fraudulent use of the name of father, who is the actual owner of the shares, the gift tax disposition is unlawful.

Article 2 (Gift Tax Taxables) of Inheritance Tax and Gift Tax Act

2014Guhap4021 Revocation of Disposition of Imposition of Gift Tax

AAA

BB Director of the Tax Office

December 5, 2014

January 30, 2015

1. The Defendant’s imposition disposition of KRW 472,789,700 against the Plaintiff on February 5, 2013 shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A.CC Co., Ltd. (hereinafter referred to as “CC”) is a representative director, who is a company engaged in reinforced concrete construction business, engineering work business, and waterworks and sewerage work business.

B. On February 5, 2013, the Defendant transferred the instant shares to the Plaintiff on September 30, 2009 at KRW 390,50,000 (per week, KRW 10,000) on the ground that, around January 1, 2004, around December 24, 2004, around KRW 7,500, around March 31, 2009, around KRW 21,000 (hereinafter “instant shares”) on the title trust of the Company’s shares, and that, on September 30, 2009, acquired the instant shares to the Plaintiff at KRW 390,00,00 (per week, KRW 10,000,000) on the ground that, in end, AD ultimately deemed that it donated the instant shares to the Plaintiff, it was subject to the disposition of KRW 4727,70,70 (hereinafter “instant shares”).

C. On March 12, 2013, the Plaintiff filed an appeal seeking revocation of the instant disposition with the Tax Tribunal, and the Tax Tribunal dismissed the Plaintiff’s claim on October 21, 2013.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Since the disposition of this case is erroneous as follows, it shall be revoked.

1) ADD unilaterally made the title of ownership of the instant shares as EE, and later retired from the instant company on September 30, 2009, and only transferred the instant shares under the name of EE by citing the Plaintiff’s name, thereby transferring the said shares to the Plaintiff, and there was no agreement between ED and the Plaintiff on the donation of the instant shares. Therefore, it cannot be deemed that there was a gift of the instant shares.

2) Even if AD donated the instant shares to the Plaintiff, the Defendant assessed the value per share of the instant shares in the business year from 2006 to 2008 on the basis of the financial statements, details of the report on the tax base of the corporate tax and corporate tax base for the instant shares, and disposed of the instant disposition. However, the instant company for the instant construction project owner, on the financial statements, stated falsely the stock assets that were not actually purchased from the Specialized Construction Mutual Aid Association for the purpose of receiving a high rating from credit assessment, and filed a return on the tax base of the instant shares in return for the profits, and was in capital potential from 2006 to 2008, and thus, there was almost no value at the time of donation of the instant shares.

B. Relevant statutes

The statutes related to the instant case shall be as shown in the attached Form.

C. Determination

1) Facts of recognition

The following facts are not disputed between the parties, or may be acknowledged by adding the whole purport of the pleadings to the statements in Gap evidence of 3 to 11, Eul evidence of 1 to 3, and witness testimony of Y.

A) ADD established the instant company that engaged in the construction business by investing KRW 300,000,000 in around 2001. At the time, AD had been 30,000 shares of the instant company (per share amount: KRW 10,000). The shareholder registry of AD transferred AD’s total shares to 2,70 shares out of 9,00 shares, 14,700 shares, 3,000 shares, 3,000 shares, 3,00 shares, 3,00 shares, and 3,00 shares held by AJ, but in fact, AD actually owned all shares. Thereafter, AD transferred AD’s shares out of its shares held in its own name on April 11, 2002 under 2,70 shares.

B) ADD paid 5,000 shares by investing KRW 50,000,00 on December 31, 2002, with the capital increase of KRW 5,000. The said KRW 5,00 shares were distributed according to the proportion of shares held in the name of AD, sulfur, Kim G, Hag, and HaJ. On the register of shareholders, AD was distributed according to the proportion of shares held by AD in the name of AD, Y, Kim Jong-G, 17,350 shares, YellowF, 3,50 shares, 3,50 shares, and 3,500 shares, respectively, in the register of shareholders.

C) ADD around January 1, 2004 changed the title holder of 10,500 shares, each of 3,500 shares held under the name of KimGG, HaH and HaJ, into E.

D) On December 24, 2004, in order to operate the soil construction business, steel and concrete construction business, and the water supply and sewerage construction business, among the specialized construction business under the Framework Act on the Construction Industry, with a view to holding the capital of KRW 600,000,000 as set forth in the registration standards under the above Act, ADD agreed to provide capital increase of KRW 250,000,000, and was loaned through a specialized consulting company. In addition, AD deposited KRW 75,000,000 in its own name under the name of E and KRW 72,50,000,000 in each of the accounts of the instant company, and obtained the certification of capital payment under the name of the shareholders of the instant company as if they were to have contributed to the capital of the instant company, and then withdrawn the entire shares in the process of 10,000,000 in the name of E.

E) Around March 2009, AD decided to increase capital of KRW 700,00,000 in order to hold capital of KRW 1,300,000,000, which is stipulated as registration criteria in the Framework Act on the Construction Industry necessary for concurrently operating an engineering work among general construction business, other than a specialized construction business that the instant company had been previously engaged in, among general construction business, and was loaned through a specialized consulting company. In addition, AD deposited the accounts of the instant company on March 24, 2009, deposited KRW 250,000,000 in its own name on the same day, and deposited KRW 50,000,000 in its own name and KRW 30,000,000,000 in its own name, and KRW 1,300,000,000,000 in its own name and deposited its capital in the instant company’s account in the process of confirming the payment of capital, 300,0000.

F) After that, on September 30, 2009, the EE retired from the instant company, and DNA transferred 39,000 shares of this case under the name of the Plaintiff.

G) On March 25, 201, ADD transferred part of the shares in the name of YF and the shares in the name of Y that it purchases 41,600 shares in the name of YF, and the shares in the name of Y 2,600 shares in the name of Y, and the shares in the name of Y 39,000 shares in the name of the Plaintiff, by forging the shares purchase certificate in the name of Y 39,000 shares in the name of Y. AD was issued a summary order on June 20, 201 on the grounds that it forged each of the above shares purchase certificates and filed a false report on the change of shares to a public official affiliated with BB Tax Office around April 201, and was issued a summary order of KRW 3,000,000 from the original branch of Y District Court of Chuncheon on June 20, 2014.

H) If the above change of shareholders is expressed in a list, it is as follows.

I) ADD, upon undergoing a tax investigation by the Commissioner of the Korea Regional Tax Office on July 2012, claimed that AD was actually in possession of the instant shares, not the Plaintiff. AD around that time, for the purpose of proving the said fact, (i) the stock trust agreement (i) January 1, 2004, (ii) September 30, 2009, (iii) the title trust agreement of the instant shares (i.e., the evidence No. 7-1, 2, hereinafter referred to as “each of the instant shares trust agreement”) and (iii) E, respectively, to the Plaintiff.

On September 30, 2009, the contents of the transfer of the shares of this case were followed by the share acquisition agreement (Evidence A8, hereinafter referred to as the "share acquisition agreement of this case") and then was made late, and upon request from the EE and the Plaintiff, the said agreement was signed and sealed.

(j) The shares subject to title trust in the stock trust agreement dated January 1, 2004 are indicated as 18,000 shares. However, the shares of the instant company, which were under the name of Y at the time, are 10,500 shares, and the company’s trade name is NN in the stock trust agreement dated September 30, 2009, but at the time, the trade name of the instant company is 'PP corporation'.

(k) The testimony of ProfessorE is as follows. From 2002 to January 1, 2007, 2007, from February 13, 2007 to September 30, 2009, the instant company served as a civil engineering technician. At the request of ProfessorDD’s request, ProfessorE issued its certificate of seal impression and certificate of seal impression to ProfessorE. While keeping this, ProfessorD unilaterally held the instant shares under the name of ProfessorE because it unilaterally transferred the name of the shares to ProfessorE or paid the subscription price for shares in the name of ProfessorE, and ProfessorE held the instant shares under the name of DaD upon request of DaD around July 2012.

2) Determination

A) Article 2(1) of the Inheritance Tax and Gift Tax Act provides that "in cases where a person who received any of the following donated property as of the date of donation is a resident, as prescribed by this Act, the gift tax shall be imposed on the donated property as of the date of donation, and Article 2(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "in cases where the donated property is a resident, all of the donated property shall be deemed to have been acquired on the date when it is objectively confirmed that the donee received stocks, etc. by payment of dividends or exercise of shareholder's rights: Provided, That in cases where the date of transfer of the pertinent stocks, etc. is unclear or prior to the transfer of the relevant stocks, etc., the date of transfer or entry thereof shall be deemed to have been made in the shareholder registry or employee registry pursuant to Article 337 or 557 of the Commercial Act." According to the tax law, whether there was a stock donation as a subject of gift tax should be determined by mutual agreement with the doctor about the donation and whether the person has actually acquired the status as a shareholder by acquiring stocks (see Supreme Court Decision 2006Do84.

B) Considering the following circumstances and the above legal principles, it is reasonable to view that ADD’s transfer of the instant shares under the name of ADD to the Plaintiff and the preparation of the instant share acquisition agreement is not based on the intent of ADD to transfer the ownership of the instant shares under the name of ADD to the Plaintiff, but merely based on the unilateral intent of ADD to deem that the instant shares were transferred in appearance, and ultimately, it cannot be deemed that AD and the Plaintiff have agreed to the intent to make a share donation.

(1) While establishing and operating the instant company independently, ADD had the shares owned in the name of YG, GaG, Haz, and DoJ, the first wife and Doz, and transferred 10,500 shares in the name of Y as of December 2004 under the name of Y, an employee at the time of 2004. At that time, ADD held the instant shares in the name of 39,000 shares in the process of capital increase over two occasions around December 2004 and around March 2009. During that process, AD owned the instant shares in the name of 39,000 shares, and during that process, AD and Y did not have concluded a title trust agreement on the said shares, and AD unilaterally used the name of ADD under the name of Y unilaterally.

(2) Upon the withdrawal of the company of this case on September 30, 2009, ADD did not inform E or the Plaintiff of the transfer of the instant shares in its name to the Plaintiff.

(3) In order to prove that the actual owner of the instant shares is himself/herself, upon undergoing a tax investigation on July 2012, ADD received the seal of each of the instant contracts by voluntarily preparing each of the instant stock title trust agreement and the instant stock transfer agreement, upon request from YE and the Plaintiff. However, since the entries in each of the instant contracts are written differently from the actual ones, it is difficult to believe the content of each of the instant contracts, since the number of shares subject to title trust or the trade name of the instant company are written differently from the actual ones.

(4) ADD, around March 25, 201, forges a certificate of stock trading in the name of KK and Y, and accordingly arbitrarily transferred the shares in the name of YF and the shares in this case to KK and YL. This is merely inconsistent with the circumstances that the Plaintiff received the instant shares as gift.

C) Therefore, even though AD cannot be deemed to have donated the instant shares to the Plaintiff, the instant disposition made on a different premise by the Defendant is unlawful.

3. Conclusion

The plaintiff's claim is reasonable, and it is so decided as per Disposition.