Daegu District Court 2014Guhap580 ( November 21, 2014)

Title trust and tax avoidance purpose of the instant shares are recognized.

As alleged by the plaintiffs, even if there was a purpose of avoiding the lending limit by person or issue, such purpose and intent of tax avoidance was also intended.

Article 45-2 of the Inheritance Tax and Gift Tax Act

2014Nu6907 Revocation of Disposition of Imposition of Gift Tax

1.AA

2.B

O Head of tax office

Daegu District Court Decision 2014Guhap580 Decided November 21, 2014

April 3, 2015

May 15, 2015

1. All appeals filed by the plaintiffs are dismissed. 2. The costs of appeal are assessed against the plaintiffs.

The judgment of the first instance shall be revoked. The Defendant’s gift tax on November 1, 2012 that reverts to the Plaintiffs in 2009.

The imposition of KRW 1,597,686,080 (including additional duties) (hereinafter referred to as "instant disposition") shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation is as follows, and the reasoning for this Court’s decision is as stated in the reasoning of the first instance judgment, except for adding the judgment as described in Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act to the plaintiffs’ assertion that is particularly emphasized in the trial as follows.

The fourth decision of the first instance court, "Plaintiff BOB" in the fourth decision of the 12th court, is regarded as "Plaintiff BB".

In the attached Form 14 of the judgment of the first instance court, the "Act on Real Name Financial Transactions and Confidentiality" in the 14thhhhh among the 'related Acts and subordinate statutes' is each stipulated as the "former Act on Real Name Financial Transactions and Confidentiality (amended by Act No. 12711, May 28, 2014)", and the "Enforcement Rule of the Act on Real Name Financial Transactions and Confidentiality" in the 15th sentence as the "Enforcement Rule of the former Act on Real Name Financial Transactions and Confidentiality (amended by Ordinance of the Prime Minister No. 1110, Dec. 5, 2014)".

2. Additional determination

A. The plaintiffs' assertion

The Defendant’s disposition of this case is based on KRW 3,006,047,793 for the value of the shares of this case. The above value includes shares that Plaintiff BB transferred to a securities account in the name of Plaintiff AA and acquired as a loan of KRW 1,391,809,235 for the loan granted as security. The Defendant’s disposition of this case on a different premise is against the economic substance or against the principle of the prohibition of double taxation. Thus, the Defendant’s disposition of this case on a different premise is unlawful since it is against the principle of the prohibition of double taxation.

B. Determination

The provision on deemed donation under Article 45-2(1) of the Inheritance Tax and Gift Tax Act is a provision imposing gift tax on separate property that requires the transfer or exercise of the right to be registered under the name of the actual owner and title holder. Since the property deemed donated pursuant to the above provision is not the purchase price of the title trust shares, it is the title trust shares themselves, not the purchase price of the title trust shares (see Supreme Court Decision 2005Du10200, Feb. 8, 2007). In a case where shares trusted are sold and a new shares are purchased under the name of the trustee with the sale price, then the value of donated shares should be calculated as included in the deemed donation donation under the name of the new shares. Accordingly, the imposition of gift tax by separately applying the above deemed donation provision is not contrary to the principle on the prohibition of double taxation, or is also contrary to the principle on deemed donation of shares under the name of the Plaintiff 2, which is deemed to have been donated under the name of the original owner and title trust (see Supreme Court Decision 2010Nu2778, Apr. 19, 2019).

Therefore, the Defendant’s imposition of gift tax including the stocks newly trusted under Plaintiff AA’s name as the subject of deemed donation cannot be deemed unlawful against the economic substance or against the principle of double taxation prohibition, etc., and there is no reason to deduct the said share portion from the value of donated property. Therefore, the Plaintiffs’ above assertion is without merit.

3. Conclusion

Therefore, all of the plaintiffs' claims shall be dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and all of the plaintiffs' appeals are dismissed as it is without merit, and it is so decided as per Disposition.