S'pore PR skipped US tax but lost $2m of Apple shares to ex-wife

High Court rules he could not backtrack on gift to woman with whom he parked shares

- Tan Ooi Boon Invest Editor

Sham transactions that are done with the purpose of avoiding taxes will often end up causing more losses, as a man found out after parking about $2 million worth of Apple shares with his wife.

When the wealthy American couple, who are permanent residents here, clashed over the shares during their divorce at the Singapore High Court, the man found out to his horror that he no longer owned the shares because he was deemed to have gifted these assets to his then wife as part of his ploy to avoid paying US taxes for them.

Normally, when you pay for an asset that is given to others, you can still retain ownership via a "resulting trust" if you can show you are merely asking the recipient to hold it for you.

But there will be no resulting trust in your favour if your purpose of asking others to hold the asset on your behalf is aimed at circumventing a law, such as using the false arrangement to avoid paying tax.

In this case, High Court Judge Choo Han Teck said the man could not backtrack on his gift to now claim that he owned the shares because allowing such a claim would undermine the purpose of the US gift tax exemption, which allows US citizens to give a fixed amount of assets during their lifetime without incurring taxes.

"I find that the doctrine of illegality bars the enforceability of the resulting trust, and losses lie where they fall. Being that, the legal ownership now lies with the wife, the shares will be counted to her direct contribution," Justice Choo added.

This meant that the $2 million would be treated as her money in the matrimonial pool and this would directly increase her overall share of their total assets.

Justice Choo's ruling will become precedent for future divorce cases because it came soon after another High Court judgment that ruled property decoupling is illegal if it is done solely to avoid tax.