Plaintiff 1 and three others (Law Firm Sejong, Attorneys Lee Byung-ju, Counsel for the plaintiff-appellant)

head of Dongjak-gu Tax Office

March 30, 2012

Seoul Administrative Court Decision 2011Guhap5605 decided October 7, 2011

1.The judgment of the first instance shall be modified as follows:

A. Of the instant lawsuit, the part on the Defendant’s claim for revocation of KRW 1,74,050,430 among the disposition imposing KRW 2,403,402,185, and the part on the Defendant’s claim for revocation of KRW 162,857,830 among the disposition imposing penalty tax in 232,561,065, and the part on the claim for revocation of KRW 162,857,830, respectively.

B. The portion exceeding 54,612,718 won among the portion of the disposition imposing penalty taxes for insincerey payment, excluding the portion of the above rejection, and the portion of the disposition imposing penalty taxes for insincerey payment, and the Defendant’s disposition imposing penalty taxes for insincerey payment to the Plaintiffs on April 8, 2009 shall be revoked in entirety.

C. The plaintiffs' remaining claims are dismissed.

2. The 3/4 of the total litigation cost is assessed against the plaintiffs, and the remainder is assessed against the defendant.

The judgment of the first instance shall be revoked. Each disposition of the Defendant rendered against the Plaintiffs on April 8, 2009, including KRW 2,403,402,185, and penalty tax of KRW 234,369,037, shall be revoked.

1. Details of disposition;

A. On September 2, 1943, the deceased non-party 1 (the deceased on April 30, 2007) married with the non-party 3, and 4 South and North Korea as his child, namely, the non-party 4 (mama), the non-party 5 (mama), the non-party 6 (2) (mama), the non-party 2 (3), the non-party 7 (4) and the non-party 8 (2).

B. The plaintiff 1 is the deceased non-party 1's spouse of the deceased non-party 2 (the deceased on September 8, 1996). The plaintiff 2, 3, and 4 are all the deceased non-party 2's children, and all the plaintiffs are the deceased non-party 1's substitute.

C. On October 29, 2007, the deceased non-party 1’s inheritors, including the plaintiffs, reported the taxable value of the inheritance tax to KRW 7,683,489,061, but on December 14, 2007, they reported to be KRW 7,756,29,289. As for each real estate listed in the separate sheet No. 1 (hereinafter “instant real estate”), only the shares of the deceased non-party 2, the plaintiffs, and the deceased non-party 1, among the owners on the register of inheritance at the time of commencing the inheritance, were included in the inherited property.

D. On September 1, 2008, the Defendant imposed an inheritance tax of KRW 1,774,050,430 on the Plaintiffs and penalty tax of KRW 1,936,908,260 on the aggregate of KRW 1,857,830 and penalty tax of KRW 162,857,830 not paid by the deceased Nonparty 1’s inheritors (hereinafter “instant initial disposition”).

E. After the Seoul Regional Tax Office: (a) determined the shares of Nonparty 5, 6, 7, and 8 (hereinafter “Isin inheritors”) among the pertinent real estate as the property trusted by Nonparty 1, the deceased non-party 1 acquired the shares of the instant real estate; (b) added the amount equivalent to the shares of the instant real estate to the inherited property value; (c) deducted the amount of the spouse deduction from KRW 1,551,258,258 to KRW 500,000,000; and (d) calculated the taxable value of inherited property by adding the amount of the return return, the amount of the amount of the amount of the inheritance deduction to KRW 12,892,496,025 and notified the Defendant of the taxation data

F. Accordingly, on April 8, 2009, the Defendant increased the inheritance tax to KRW 4,867,085,925, and increased the penalty tax to KRW 462,382,82,823 (hereinafter “instant adjustment disposition”), and imposed penalty tax to KRW 908,679,785 on the Plaintiffs for failure to report. Thereafter, on June 1, 2009, the Defendant reduced the amount of KRW 10,109,132 out of the penalty tax for failure to report.

E. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on October 29, 2009 on July 7, 2009 following the filing of an objection. On November 4, 2010, the Tax Tribunal rendered a decision to rectify the tax base and tax amount to be deducted from the inherited property by deeming that the remaining inheritors’ share in the instant real estate was not the property trusted in title trust. Accordingly, the Defendant revised the inheritance tax amount on December 16, 2010 to KRW 2,403,402,185, to KRW 232,561,065, the additional tax on the bad faith in payment to KRW 232,561,065, the additional tax on the bad faith in payment to KRW 1,807,972 (hereinafter referred to as “instant tax reduction disposition”), and the remaining tax amount after reduction to KRW 2,637,71,222 (including additional tax) (hereinafter referred to as “instant tax imposition disposition”).

[Ground of recognition] Facts without dispute, Gap's 1, 2, 4, Eul's 1 through 4, 12, 13, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The instant disposition is unlawful for the following reasons.

1) The shares of the deceased non-party 2 and the plaintiffs among the instant real estate are not nominal trust from the deceased non-party 1, but should be excluded from the inherited property.

2) The amount of the deceased non-party 1’s spouse’s deduction of the taxable value of inherited property to non-party 3 should not be KRW 500 million, but be KRW 1,670,570,475, which is the actual amount inherited.

B. Determination

1) Ex officio determination

We examine the legitimacy of the plaintiffs' arguments ex officio before determining the propriety thereof.

A) In a case where an increase or decrease is made, the original declaration or determination loses its independent existence value by absorbing the original declaration or determination as a matter of principle, regardless of the lapse of the appeal period against the original declaration or determination, etc., a taxpayer shall be subject to adjudication in an appeal litigation; however, a taxpayer may also assert unlawful grounds for the initial declaration or determination in the appeal litigation (see Supreme Court Decision 2006Du17390, May 14, 2009). Meanwhile, Article 22-2(1) of the Framework Act on National Taxes provides that “an increase in the amount of tax initially determined under tax-related Acts shall not affect the rights and obligations relationship under this Act or other tax-related Acts with respect to the amount of tax initially determined,” provided that “an increase in the amount of tax initially determined under tax-related Acts shall not be affected by the expiration of the appeal period, even if the main purpose of legislation along with the literal content thereof is to restrict any objection against the amount of tax initially determined under the original declaration or determination, and it shall be interpreted to have been able to seek cancellation within the limit of the amount of tax amount initially determined (see Supreme Court Decision 2018Du2014.

In addition, it is reasonable to view that the lawsuit seeking the cancellation of the tax amount on the part where the dispute occurred due to the lapse of the appeal period is unlawful.

B) Therefore, in the instant case, the Plaintiffs did not follow the procedure of filing an objection, request for adjudication, etc. against the instant initial disposition within the objection period (no evidence exists to acknowledge that the Plaintiffs were dissatisfied with the procedure) and the initial disposition of this case occurred in the instant case, and thereafter rendered a decision of correction of the instant disposition on April 8, 2009, as seen in the above disposition details. As such, the part seeking the revocation of the amount of tax on the initial disposition of this case as of September 1, 2008 among the instant lawsuit is unlawful (However, as seen above, the illegality grounds of the instant initial disposition of this case as of September 1, 2008 can be asserted, and the scope of seeking the revocation is limited to the increased amount of tax, and as such, the scope of seeking the revocation is limited to the increased amount of tax as to the total amount of tax).

2) Judgment on the plaintiffs' assertion

A) Whether the shares of the deceased non-party 2 and the plaintiffs among the real estate of this case were nominal trust

(1) According to the evidence No. 7-1 to No. 14, from May 1982 to May 196, the fact that the registration of ownership transfer was completed between the deceased non-party 2 and the non-party 8 due to donation or sale of the instant real estate from May 1982 to May 196. (The registration of ownership transfer was completed with the deceased non-party 2 as to the real estate No. 9, but the registration of ownership transfer was completed with the plaintiffs' co-ownership due to inheritance. As to the real estate No. 11,12 and 13, the registration of ownership transfer was completed with the deceased non-party 2 and the remaining successors' co-ownership (the share ratio 1/5). As to the real estate No. 14, the registration of ownership transfer was completed with the deceased non-party 2 and the non-party 6 co-ownership (the share ratio 1/2) and the registration of ownership transfer was completed with respect to the shares of the plaintiffs as to the real estate in this case.

In order for the shares of the deceased non-party 2 and the plaintiffs to be included in the inherited property at the time of commencement of the inheritance, the above part of the real estate of this case should be actually owned by the deceased non-party 1, notwithstanding the above registration. Since the defendant is the deceased non-party 1's property trusted in title to the deceased non-party 2, it is examined whether the deceased non-party 2's shares out of the real estate of this case are trusted in title (the plaintiff's shares are all transferred in the name of both the deceased non-party 2 and the transfer of ownership in the name of the plaintiffs due to inheritance, and therefore whether the plaintiffs' shares in the name of the plaintiffs were trusted in title due to the inheritance depends on whether the previous non-party 2's shares were trusted in title, and therefore, it is examined only about whether the deceased non-party 2's shares in title was trusted in title).

(2) In order to support the fact that shares in the deceased non-party 2, among the real estate in this case, are nominal due to the following reasons, the evidence submitted by the defendant is insufficient to recognize the title trust, and there is no other evidence to acknowledge it otherwise. The deceased non-party 1 was 70 old age since 1918, which was the deceased non-party 2 and the remaining inheritors, around the time when they exceeded the ownership transfer registration on the real estate in this case. As such, it is very exceptional that the elderly father's awareness about the title trust in the same shares sharing (in particular, there is no specific circumstance to title trust only with the deceased non-party 2), and the defendant excluded the shares in this case, other than the deceased non-party 2, from the inherited property in accordance with the decision of the Tax Tribunal, on the premise that the remaining successors except the deceased non-party 2, who were the deceased non-party 2, were not subject to the first disposition of the title trust on the real estate in this case, and thus, it is difficult to view that the plaintiffs reported the shares in this case's first disposal of the real estate in this case.

(A) Summary order (No. 6)

According to the above evidence, on the ground that the deceased non-party 1 was nominally trusted to the remaining inheritors except the deceased non-party 1 and the non-party 8 on the part of the instant real estate, the fact that the other inheritors except the deceased non-party 1 and the non-party 8 were issued a summary order due to the violation of the Act on the Registration of Real Estate under Actual Titleholder's Name. Thus, there is no direct evidence to acknowledge that the deceased non-party 2

(B) A civil judgment (Evidence No. 7) and a protocol for mediation (Evidence No. 8)

The above evidence is a decision of the first instance court of a lawsuit seeking the implementation of the procedure for ownership transfer registration based on the termination of the title trust against the plaintiffs by the deceased non-party 1 on the premise that the shares in the name of the deceased non-party 2 among the real estate in this case were nominal.

The judgment of the court of first instance reveals that the deceased non-party 2's share in the real estate of this case was nominal, and it is true that the above paragraph (1) of the conciliation protocol confirmed that the deceased non-party 2's share in the above deceased non-party 2 was nominal, and that it was owned by the deceased non-party 1. However, Articles 2 and 3 of the above conciliation protocol provide that the deceased non-party 1 managed the real estate of this case until December 31, 2009, but did not claim for the restoration of the name of registration, but did not pay living expenses to the plaintiffs. On December 31, 2009, the deceased non-party 2's ownership in the real estate of this case was transferred to the plaintiffs. It appears that it would be natural to explain that the deceased non-party 2's share in this case was donated to the deceased non-party 2, and that the deceased non-party 1's share in this case's disposal of the real estate of this case was not enough until the deceased non-party 2's.

(c) Other

In addition, in light of the content of the evidence No. 9-1, No. 2, 3, 6, 7, and No. 10-1, 2, 3, and No. 11-1, 2, and 3 of the evidence No. 10-1, 2, and 3 of the evidence No. 9-2, it is insufficient to recognize that the deceased non-party No. 2’s share in the instant real estate was

B) Whether the amount to be deducted from the taxable value of inherited property can be recognized

(1) Article 19(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 9269, Dec. 26, 2008; hereinafter the same) provides that "the amount actually inherited to a spouse due to the death of a resident shall be deducted from the taxable amount of inheritance taxes." Paragraph (2) of the same Article provides that "the spouse's inheritance deduction shall be made pursuant to Paragraph (1) only where the spouse's inherited property is reported by six months from the date following the inheritance tax base return (within six months from the date of the commencement of inheritance) under Article 67, and where the spouse's inherited property cannot be divided by the due date due to extenuating circumstances prescribed by Presidential Decree, and where the spouse's inherited property cannot be reported by six months from the date following the due date of division of inherited property, it shall be deemed that the report is filed within the due date of division of inherited property of the spouse. Accordingly, Article 17(2) of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 18, 2019) provides that the spouse's.

(2) We examine the instant case based on the aforementioned statutory content.

As seen earlier, as the deceased non-party 1 died on April 30, 2007, May 1, 2008, which was six months from the day after the deadline for filing the inheritance tax base, was due for the division of the spouse’s inherited property. According to the evidence No. 6, it can be recognized that the deceased non-party 1’s inheritance was divided into inherited property on January 15, 2010, and there is no evidence to acknowledge that there was any inevitable reason under the above Enforcement Decree to the deceased non-party 1’s heir. Thus, the deceased non-party 1’s spouse’s inheritance deduction against inherited property cannot be applied, and the amount of KRW 50 million can be deducted pursuant to Article 19(3) of the Inheritance Tax and Gift Tax Act.

Therefore, the disposition of this case based on this premise is legitimate, and this part of the plaintiffs' assertion is not acceptable.

(iii) the calculation of a reasonable amount of tax;

As seen earlier, it is illegal to include the deceased non-party 2 and the plaintiffs' share in the inherited property among the real estate of this case. As such, the reasonable amount of tax calculated by excluding it is KRW 1,408,94,267 of the inheritance tax, KRW 217,470,548 of the additional tax, and KRW 0 of the additional tax for failure to report as shown in the attached Table 3.

4) Sub-committee

Therefore, among the lawsuits in this case, the part of the claim for cancellation of KRW 1,774,050,430, which occurred as seen above, among inheritance tax of 2,403,402,185 (the remaining amount after the correction disposition of this case and the subsequent correction disposition of the reduction after the correction disposition of this case) filed by the defendant against the plaintiffs on April 8, 2009, is unlawful. Since the remaining part of the lawsuit in this case does not reach the tax amount due to the lack of legitimate tax amount, it is unlawful to revoke the whole of the claim. Since additional tax amount of KRW 232,561,065 (the remainder after the correction disposition of this case and the subsequent correction disposition of the reduction after the correction of this case) is unlawful, the portion of the claim for cancellation of KRW 162,857,830, which is the original disposition amount of the original disposition in this case, and the remaining part of which exceeds the tax amount due to the difference between the tax amount due to the lack of legitimate tax amount, it must be revoked.

3. Conclusion

Therefore, since part of the Plaintiff’s claim for revocation of the disposition imposing inheritance tax and penalty tax in good faith among the lawsuits in this case is unlawful, each of them is dismissed, and the remainder of the claim shall be accepted within the scope of the above recognition, and the remainder shall be dismissed as it is without merit. However, the judgment of the court of first instance is unreasonable with a different conclusion, and it is so decided as per the above.

[Attachment]

Judges Kim Jong-chul (Presiding Judge)