"Mom Claims 'Only Lending Name for Overseas Investment'... Court Rules 'Gift Tax Justified'"

The court ruled that the tax authorities' imposition of gift tax on a son who received cash transfers from his mother and invested in overseas real estate and corporations was justified.

Seoul Administrative Court, Seocho-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

According to the legal community on the 7th, the Seoul Administrative Court, Administrative Division 2 (Chief Judge Shin Myung-hee) recently ruled against Mr. A in the first trial of the gift tax imposition cancellation lawsuit filed against the Gwanak Tax Office.

Previously, Ms. B, the mother of Mr. A, sold domestic real estate in 2015 and transferred the sales proceeds to Mr. A's account. Mr. A converted this money into Japanese yen and remitted a total of 180 million yen (approximately 1.76 billion KRW) to Japan in three installments, using it as local investment funds. Of this, 77.85 million yen (approximately 700 million KRW) was used for Japanese real estate investment, 100 million yen (approximately 1 billion KRW) was invested in a Japanese corporation wholly owned by Ms. B, and 5 million yen (approximately 47 million KRW) was used for personal expenses.

The National Tax Service regarded all these as gifts and imposed a gift tax of 910 million KRW. Mr. A requested relief from the Tax Tribunal, but after only a small reduction, he turned to the administrative court.

During the trial, Mr. A argued, "It was not a gift but only a temporary acquisition of real estate on behalf of Ms. B." The claim was that Ms. B needed real estate in Japan for a nursing home business, but since she was at risk of forced deportation, she temporarily lent her name to acquire the property instead. It was also said that Ms. B intended to facilitate her son's acquisition of a Japanese visa.

The first trial dismissed all of Mr. A's claims, stating, "It has not been proven that there was no tax avoidance purpose." The court said, "Mr. A effectively admitted during the tax authorities' investigation that he was the actual acquirer of the real estate in Japan," and although he claimed that some of the money was borrowed from Ms. B, there is no evidence that interest payments were made to Ms. B despite the interest agreement stated in the loan agreement.

The court added, "If Ms. B's nursing home business was the purpose, it would have been possible to acquire the property under the name of Ms. B's Japanese corporation," and stated, "Although it is claimed that Ms. B was designated for forced deportation in Japan in 2014 for violating the Immigration Control and Refugee Recognition Act, making it difficult for her to directly acquire real estate, the evidence submitted by Mr. A is insufficient to recognize this fact." Regarding the initial claim that Ms. B was informed by the bank that large remittances were impossible, the court said, "This is difficult to accept."

Mr. A appealed the first trial ruling.

This content was produced with the assistance of AI translation services.