Cho High Court Decision 2001Do0129 ( October 22, 2011)

It is difficult to readily conclude that the principal obligor was insolvent and thus, does not constitute a guaranteed obligation.

Whether the principal debtor is not in a state of impossibility at the time of commencement of the inheritance, it is objectively acceptable that the principal debtor is in a situation in which it is impossible to recover his claim in fact due to the circumstances such as bankruptcy, composition, corporate reorganization, etc., or business closure, missing, etc., for a considerable period of time.

2011Guhap28783 Revocation of Disposition of Levying Inheritance Tax

Is 2,000

Director of the District Office

January 13, 2012

February 3, 2012

1. All of the plaintiffs' claims are dismissed.

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

The Defendant’s disposition of imposing inheritance tax of KRW 194,770,440 (including additional tax) against the Plaintiffs on October 5, 2010 shall be revoked.

1. Details of the disposition;

The following facts may be acknowledged as either in dispute between the parties or in full view of the purport of the whole pleadings in the entries in Gap evidence 1-1-3 and Eul evidence 1-3:

A. XX Co., Ltd. (hereinafter referred to as " XX") was established on March 27, 1992 and run the business of manufacturing and selling electronic components. On October 18, 2008 and closed down on October 31, 2008, the network minimumAA (hereinafter referred to as "the network") has been operated as the representative director of XX.

B. XX was granted loans of KRW 1,180,00,000 in total from an enterprise bank, in eight times from March 29, 2005 to May 16, 2008, as indicated in the column for each initial loan amount set forth in [Attachment 1] Nos. 1 to 8 of the list of loans from the enterprise bank (hereinafter “the obligations of each of the loans listed in the table Nos. 1 to 8 of the same list”) (hereinafter “the obligations of each of the loans of this case”) in succession, and “the obligations of each of the loans of this case” in total.

C. At the time of each of the above loans, the deceased entered into a joint and several guarantee contract with the corporate bank on the debt of each of the loans of this case, while for the debt of each of the loans of this case 2.3, the real estate listed in paragraph (1) of the attached Table 2 in the attached Table 7 and paragraph (2) of the same Table for the debt of each of the loans of this case, and a water guarantee contract which provides the real estate listed in paragraph (2) of the same Table as each of the collateral (hereinafter collectively referred to as "each of the guaranteed obligations of this case, including the joint and several guarantee contract

D. The Deceased died on September 30, 2008, and accordingly, the Plaintiff BB, the wife, and Plaintiff BB, Plaintiff LCC, and mostD jointly succeeded to the deceased’s property.

E. On March 24, 2009, the Plaintiffs reported to the Defendant the inheritance tax base of KRW 2,992,958,511, and KRW 2,031,229,301 (the above inheritance obligation includes KRW 1,116,592,00 in total of the balance of each of the guaranteed obligations of this case), the taxable value of the inherited property of KRW 937,452,230, and the tax base of the inheritance.

F. From March 18, 2010 to June 25, 2010, the Defendant conducted an inheritance tax investigation on the deceased’s inherited property. As a result of the tax investigation, the Defendant determined that each of the guaranteed obligations of this case among the obligations reported by the Plaintiffs as inheritance obligations cannot be deemed to have been determined as the obligation to be borne by the deceased at the time of the deceased’s death, and that the Defendant imposed the tax base of KRW 2,199,118,557, and the tax base of KRW 713,229,09 on the taxable value of inherited property by failing to deduct it from the value of inherited property, and imposed the tax base of KRW 194,70,40 (including additional taxes) on the Plaintiffs on October 5, 2010 (hereinafter “instant disposition”).

G. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on December 17, 2010, but the said appeal was dismissed on July 2, 201.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

Considering the fact that XX was suffering from management difficulties due to the sudden death of the deceased, the deceased’s failure to pay the deceased on October 18, 2008 and the end of 20 days after the death of the deceased, that no residual property remains due to crushing and incineration of all the collection parts, raw materials, etc. during the closure of XX, and that according to the financial statements prepared as of December 31, 2008 as of December 31, 2008, the net income for the year 2008 -1,108,330,000 won is a duty for the deceased to pay the deceased’s final burden at the time of commencement of the inheritance. Accordingly, the Defendant’s instant disposition on a different premise should be revoked.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

The amount of an inheritee’s obligation to be deducted from the value of inherited property pursuant to Article 14(1)3 of the Inheritance Tax and Gift Tax Act cannot be the amount of the obligation that the decedent would have to ultimately bear at the time of commencement of the inheritance. Thus, in cases where the decedent bears joint and several liability for a third party at the time of commencement of the inheritance or is liable as a surety’s property for a third party, since the principal obligor is insolvent, if it is deemed that there is no possibility for the obligor to obtain reimbursement even if the principal obligor exercises his/her right to reimbursement against the principal obligor, the amount of such obligation may be deducted from the value of inherited property. In such cases, whether the principal obligor is not in an impossible condition at the time of commencement of the inheritance, general, there is no possibility for the principal obligor to obtain financing differently because the status of excess due to bankruptcy, composition, corporate reorganization, or compulsory execution of punishment continues for a considerable period of time, and it is objectively determined that a claim can not be recovered due to the circumstances such as failure to meet the requirements for reimbursement, and thus, it should be determined that there is a special reason for 964.

In light of the following circumstances, it is difficult to readily conclude that: (a) the descriptions of evidence Nos. 6 through 8, evidence Nos. 9-1, 2, and 10 through 13, and evidence Nos. 10 to 13, as well as the overall purport of the pleadings in addition to the descriptions of evidence Nos. 3 and 4 as to this case’s health team, evidence Nos. 6 through 8, and evidence No. 9-1, 2, and 10 to 13, as to this case’s case’s case’s case’s case’s case’s case’s case’s case’s case’s case’s case’s case’

1) The Plaintiffs asserted that the deceased’s death caused management difficulties and forced discontinuance of business. However, from January 1, 2008 to October 31, 2008, the sales amount of KRW 816,394,608, which was from October 31, 2008, led to the gross sales amount of KRW 12,556,277 (the sales amount of KRW 803,838,331).

2) The net profit per books from January 1, 2008 to December 31, 2008 pursuant to the standard income statement for the business year 2008 (Evidence A 13) shall reach KRW 1,108,330,953. However, the main reason is that the net profit per books from January 1, 2008 to December 31, 2008 is 906,80,000,000 won due to the reduction of inventory assets, and 36,413,110 won due to the disposal of tangible and intangible assets. The business profit and loss for the business year 2008 is merely KRW 123,580,641, regardless of the deceased’s death.

3) With respect to each loss arising from the reduction of inventory assets and the disposal of tangible and intangible assets, the Plaintiffs submitted each evidence (Evidence Nos. 10 through 12) to the effect that they disposed and disposed of and disposed of to a third party the whole of measuring instruments, machinery, office fixtures, raw materials inventory amounting to KRW 45,321,236, and complete inventory amounting to KRW 232,634,035, etc. on December 12, 2008. However, from January 208 to October 2008, it is difficult to view that the transaction was conducted not only by the office’s normal transaction but also by the office’s transaction without any cost but also by the office’s normal transaction.

4) According to the standard balance sheet of XX as of December 31, 2007, the current debt of XX including the obligation of each of the instant loans is KRW 1,519,170,277. On the other hand, the current asset is about KRW 1,940,166,273 [Article 15,265,010 of the suspected and cash assets, KRW 69,963,926 of the short-term deposit, KRW 674,213,924, KRW 50,977,801 of the outstanding debt, and KRW 1,129,745,612 of the current asset], and the short-term deposit and sales credit of the current asset are about KRW 400,00,000 [Article 15,265,010 of the current asset and cash assets, KRW 69,926 of the short-term deposit, and KRW 50,977,801 of the outstanding asset.

5) The earned surplus in XX from December 31, 2007, as of December 31, 2007, reaches KRW 1,473,701,126 (Voluntary reserve 93,412,18 won, non- disposed profit-making surplus 1,380,289,08 won).

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.