The scope of taxes subject to the proviso of Article 32-2(1) of the former Inheritance Tax Act and the burden of proof.

The legislative intent of Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993) is to effectively prevent the act of tax avoidance using the title trust system and realize the tax justice. Thus, if the purpose of the title trust is tax avoidance, it shall not be limited to the gift tax without any explicit basis, and the burden of proving that there was no purpose of tax avoidance in the title trust is the person who asserts it.

Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 4662 of Dec. 31, 1993)

Supreme Court Decision 94Nu11729 Decided November 14, 1995 (Gong1996Sang, 95) Supreme Court Decision 95Nu7024 Decided December 5, 1995 (Gong1996Sang, 1617), Supreme Court Decision 95Nu13555 Decided April 12, 1996 (Gong196Sang, 1617), Supreme Court Decision 95Nu1580 Decided May 10, 1996

Plaintiff (Attorney Kim Chang-soo et al., Counsel for the plaintiff-appellant)

Samsung Head of Samsung Tax Office (Attorney Lee Byung-hun, Counsel for defendant-appellee)

Seoul High Court Decision 94Gu19985 delivered on June 2, 1995

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

According to the reasoning of the judgment below, the court below revoked the disposition imposing the gift tax of this case on February 3, 1991 on the ground that the non-party 1, who was the founder of the non-party 1 corporation, entrusted the plaintiff with the ownership of 9,000 shares at the time of the capital increase on September 7, 1992, in order to avoid the limitation under the Commercial Act demanding at least seven promoters for the establishment of the non-party 1 corporation and the compulsory execution due to a large amount of joint and several debt borne by the above non-party 1, and on September 7, 1992, the above title trust did not have the purpose of evading the gift tax, and there was no evidence that the above non-party 1 did not recognize that the above non-party 1 donated the shares of this case to the children or entrusted the shares of this case to the plaintiff in the name of the plaintiff by gathering a high rate of global income tax, etc., and even if it was a title trust to avoid compulsory execution and to impose a high rate of global income tax.

The legislative intent of Article 32-2(1) of the Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990; Act No. 4662, Dec. 31, 1993; Act No. 4662, Dec. 31, 1993) is to recognize an exception to the substance over form principle in the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, where the purpose of the title trust is tax avoidance, if the purpose of the title trust is tax avoidance, it shall not be limited to the gift tax without any express basis, and the burden of proving that there was no purpose of tax avoidance in the title trust shall be the person who asserts it (see, e.g., Supreme Court Decisions 94Nu11729, Nov. 14, 1995; 95Nu7024, Dec. 5, 1995; 95Nu15355, Apr. 155, 1996).

Therefore, the court below should examine and determine whether the above non-party 1 had no other purpose of evading taxes other than gift tax in the title trust of the shares of this case to the plaintiff. Furthermore, on the ground that there is no evidence to support that the non-party 1 had no purpose of evading gift tax on the shares of this case or that there was no purpose of evading global income tax, etc. on the ground that the non-party 1 had no purpose of evading global income tax on the above shares of this case, the court below did not apply the provision on constructive gift in the above title trust, which affected the conclusion of the judgment.

Therefore, the judgment below is reversed, and the case is remanded to the Seoul High Court. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-soo (Presiding Justice)