Where the value obtained by deducting debts, etc. from the value of inherited property is incidental, the method of calculating the taxable amount of inheritance taxes.

Articles 13(1) and 14 of the Inheritance Tax and Gift Tax Act

Plaintiff (Attorney 000,000)

Head of Central Tax Office

Seoul High Court Decision 2005Nu20674 decided May 10, 2006

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

We examine the grounds of appeal.

Article 13(1) of the Inheritance Tax and Gift Tax Act (hereinafter “the Act”) provides that the taxable amount of inheritance taxes shall be calculated by adding the property value donated by an ancestor to an heir within ten years before the date inheritance commences and the property value donated by an ancestor to a person other than an heir (hereinafter “property donated before birth”) within five years before the date inheritance commences, after subtracting public imposts, funeral expenses, and debts (hereinafter “debts, etc.”) from the value of inherited property under Article 14 of the Act from the value of inherited property, to the amount of the taxable amount of inheritance taxes, thereby promoting the fairness of tax burden by preventing or reducing the burden of inheritance by transfer the property subject to imposition of inheritance tax in advance in the form of donation and by distributing and concealing inherited property.

As such, the legislative purport of including the value of the donated property before birth in the taxable amount of inheritance taxes and the above provision stipulate that the value of the donated property before birth should be added after deducting the debts, etc. from the value of the inherited property. In addition, in calculating the taxable amount of inheritance taxes, it is reasonable to add the value of the donated property based on the deduction balance of the father (-) in cases where the value of the inherited property minus the debts, etc. is an incidental (e.g., equal) and the value deducting the debts, etc. from the value of the inherited property is an incidental (-). In cases where the value of the inherited property is an incidental (i.e., the value subtracting the debts, etc. from the value of the inherited property, it shall be deemed zero) and where calculating the taxable amount of inheritance taxes is calculated, the total amount of the donated property subject to inheritance taxes, including the donated donated property, is the same amount as that of the inherited property, but there is no case where the inheritance debts, etc. exceed the inherited property.

Nevertheless, the court below determined that the total amount of the pre-paid donated property should be the taxable amount of inheritance taxes by recognizing the fact that there is no balance of the pre-paid donated property when deducting debts, etc. from the value of the inherited property of this case. Such judgment of the court below is erroneous in the misunderstanding of legal principles as to the calculation of taxable amount of inheritance taxes under Article 13 (1) of the Act and Article 13 (1) of the Act, which aim to guarantee the legal stability and predictability of property rights and people's lives by clearly prescribing the taxation requirements by law, thereby affecting the conclusion of judgment

Therefore, the part of the lower judgment against the Plaintiff is reversed, and that part of the case is remanded to the lower court for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Young-ran (Presiding Justice)