Cho High Court Decision 201Do4766 ( December 29, 2011)

Gift tax assessment is unlawful because no title trust agreement exists.

Even if there is a title trustee who received the old shares at the time of share swap, the gift tax under the title trust is illegal in view of the fact that the title trustee merely received new shares by the validity of the exchange contract and there is no room for existence of the act of title trust itself.

2012Revocation of disposition imposing gift tax, 11140

right XX

The director of the tax office.

July 6, 2012

July 20, 2012

1. The Defendant’s imposition of gift tax of KRW 000 against the Plaintiff on March 11, 201 shall be revoked.

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

The order is as follows (as of March 18, 2011, it is a clerical error).

1. Details of the disposition;

A. On July 18, 2005, PN Entertainment Co., Ltd., an unlisted corporation, concluded a comprehensive share swap agreement that “OO (hereinafter referred to as “OO”) and the shareholders of XX will issue and deliver 6.1639 shares per share of O issued 6.1639 shares to the shareholders of XX.”

B. The Plaintiff was under title trust with KimA, 7,140 shares issued in XX. Accordingly, on October 28, 2005, issued 44,010 shares of OO (hereinafter “instant shares”) pursuant to a comprehensive share swap agreement. On December 31, 2005, the Plaintiff was registered as the owner of the instant shares in the registry of shareholders.

C. On March 11, 2011, the Defendant imposed a gift tax of 000 won on the Plaintiff on the ground that “the instant shares were re-titled by KimA on the transfer date of entry” (hereinafter “instant disposition”).

D. The Defendant filed an appeal seeking the revocation of the instant disposition on October 13, 2011, but was dismissed by the Tax Tribunal on December 29, 2011.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 6, 7, Eul evidence No. 1 (including additional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful, inasmuch as no title trust agreement on the instant shares exists and no purpose of tax avoidance exists.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

① Article 45-2(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “Inheritance Tax and Gift Tax Act”) applies where the actual owner and the nominal owner enter into a registration, etc. in the future by entering into an agreement or communication with the nominal owner with respect to the property which requires the transfer or exercise of the right, so it is not applicable where the registration, etc. is unilaterally made under the nominal owner’s name regardless of the nominal owner’s intent (see Supreme Court Decision 2007Du15780, Feb. 14, 2008). Since comprehensive share swap is a transfer of shares of the company becoming a wholly owned subsidiary for corporate restructuring, the shareholders of the company becoming a wholly owned subsidiary are transferred to the company becoming a wholly owning parent company after being allocated new shares of the company becoming the shareholders of the relevant company, and thus, it is difficult to view that there is an unreasonable result of the transfer of new shares issued by the former title trust agreement between the title truster and the new shares under title trust agreement.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is decided as per Disposition.