This is the seventh publication of the "Financial Transactions and Taxation" Research Group.
This report compiles eight articles that not only address the latest issues in the taxation of financial transactions but also engage broadly with foundational questions in tax law theory. The volume includes: a reexamination of the concept of “consumption” in defining the tax base (Asatsuma); the classification of income of gains arising from the repayment of depreciated claims (Nagato); foreign exchange gains and losses (Fujioka); the concept of “fair market value” in corporate taxation (Fujiwara); the anti-avoidance rule on transactions by closely held corporations (Yoshimura); current developments in international taxation (Fuchi); a behavioral model of tax compliance (Masui); and a reconsideration of seigniorage (Fujitani).

By Prof.Hiroto Dhogauchi(eds.) and other 7 members

This study is a collection of five papers which are products of our research project from June 2021 to March 2023. The aim of our research is to discuss several current problems on trusts selected by each member. All of the selected problems deal current legal topics, and have close relation with the fundamental principles of trust law.

Contents

1. Trends in the Concept of Trust as an Entity in American Trust Law
   Akifumi Shibata
2. Object of Rescission of Fraudulent Acts Against Trust Beneficiaries
   Yuki Setoguchi
3. Assets Liable for Torts Compensation and the Way of Reimbursement
   Hanae Furuya
4. Beneficiary Rights and the Status of Beneficiary
   Kazuma Yamashiro
5. Improper Exercise of Right to Designate or Change Beneficiaries
   Ippei Osawa
6. Cahnge of Holder of a Vested Right in Trust
   Keisuke Yamaguchi
7. Research Trends on Trusts and Legally Reserved Portion in Succession
   Hiroto Dogauchi

Our study group from 2021 to 2023 focused on the so-called Private Trusts in Japan, which roughly correspond with family trusts in USA. This area was before the Trust Law Reform in 20xx, with few exception, not the concern of Trust Banks and therefore underdeveloped. But after the Reform n 20XX family members or other private persons became trustee of private trusts and all kinds of agreements were made between the settlor and the trustee reflecting the interests of the parties. This caused new problems never seen before when Trusts Banks were the trustee. We selected these new issues in this volume as follows: Basic structure and the features of family trust in Japan, The legal problems of wealth transfer on death using trusts, especially problems on impartiality and conflict of interests, Legal status of trust property and obligation during the period between the death of the trustee and the appointment of a new trustee, Legally reserved portion of heirs and disposition of property using trusts, Use of private trust and legal problems thereof including tax problem from the eyes of practicing lawyers, Problem related to land registration in private trusts. There were other interesting topics reported and discussed but not printed in this volume. I hope they will be published in some other time.

Sellers, underwriters, purchasers, brokers, and holders of shares may be subject to, or required to comply with, financial regulations, corporate law, civil procedure, inheritance law, and other rules and regulations, depending on the circumstances. Where shares of a corporation are held by a trust, it is often unclear whether such various rules and regulations would apply to the beneficiaries or the trustee. Each of five experts in our study group picked up a certain area of law in this regard, analyzed the purpose of the law, and proposed solutions.

This is the sixth publication of the "Financial Transactions and Taxation" Research Group, which explores the intricate relationship between taxation and "culture" in its broadest interpretation. This volume also serves as a tribute to Mr. Eisuke Hamamoto, former Commissioner of the National Tax Agency, to whom many of our study group members are indebted. Mr. Hamamoto graciously contributed an essay on the establishment of the tea ceremony, shedding light on the limitations of language in our practical endeavors. Through the tea ceremony's historical narrative, he illuminates the profound truths that transcend mere verbalization, underscoring the essence of human civilization.
Culture, by its very nature, is multifaceted, urging us to expand our intellectual boundaries at the crossroads of various concepts and phenomena. Therefore, while this report loosely revolves around the theme of "culture," it refrains from imposing a rigid definition, allowing each author the freedom to interpret it at their discretion. Nonetheless, certain cohesive themes emerge within this exploration.
Firstly, we delve into how tax law interacts with—or ought to interact with—cultural artifacts and phenomena. Masui's paper delves into the mechanics of the fine arts market, offering a comprehensible explanation for legal professionals. Kohyama's contribution explores the temporal aspect of consumption taxation, particularly in relation to durable consumer goods such as artworks. Meanwhile, the Asatsuma paper contemplates "culture" as something transcending market logic and examines how the framework of welfare economics conceptualizes the destruction of culture.
Secondly, we scrutinize the legal frameworks supporting cultural endeavors. Fujitani's paper examines charity laws, typical vehicle for private museums and art galleries, and ponders whether donors' philosophies should endure over time. Nakazato's contribution explores the concept of "mortmain (dead-hand)" from a historical perspective, further enriching our understanding of this issue.
Thirdly, we inevitably confront the notion of community that shares a context and a “language", when we consider “culture.” Tax law scholarship revolves around the phenomenon of "taxation," a concept universally understood within our study group and beyond. Fuchi revisits this foundational concept from a comparative law standpoint, while Nagato analyzes the economic and societal conditions shaping the discourse surrounding taxation. From an institutional viewpoint, "culture" can be defined as a shared belief system that facilitates strategic collaboration among members of society in a game-theoretic context. These two papers illuminate the "culture" of taxation law in this precise sense.

Trust law has the aspect of organization law. In this vein, twelve experts in our study group explored a comparison of laws between trusts and business corporations regarding ten selected topics. On the basis of this examination, we plan to consider legislative proposals where rules of current trust law need be improved.

As John Langbein of Yale Law School clearly explains, we should pay attention to the American nonprobate revolution in the last half century (See, e.g., Langbein, John H., Because Property Became Contract: Understanding the American Nonprobate Revolution (March 23, 2020). The Changing Role of Property Law: Rights, Values and Concepts, edited by Nordtveit, Ernst, Edward Elgar Publishing, 2023, 115-129, Yale Law School, Public Law Research Paper , Available at SSRN: https://ssrn.com/abstract=3561181)

The so-called revolution occurred partly because American probate system was time-consuming and costly. In sum the traditional system was inefficient. To respond to this situation, Langbein says, the private financial businesses offered to the public various wills-alternatives including trusts. Our study group headed by Norio Higuchi, emeritus professor of the University of Tokyo, decided to understand the current situation of American estate planning system. We selected as a text a basic casebook (Robert H. Sitkoff ＆ Jesse Dukeminier, Wills, Trusts, and Estates, 10th ed. Aspen Casebook, 2017）and each member was assigned to make a report on each chapter. Among the 14 chapters, intestacy is only one chapter, wills for only three, and trusts are 7, which strongly shows that the trust is in the center of succession system in contemporary United States. Also, we should note that two of the members had joined in Professor Sitkoff’s class at Harvard Law School.

Nowadays in Japan the interest in family trust is increasing. Also, the inheritance disputes are increasing in our family courts due to the lack of estate planning. That is a satisfactory reason for us to pay attention to what is going on in the United States.

The outcome of the two-year study of our group is shown below. If you look at the contents, you will be able to understand what kind of discussion we have done. Contents are followed by members names. I finally express many thanks to the Trust Mirai Forum foundation for the support of our research group.

Contents

1. Succession and guardianship: Privatization and private ordering in place of public system in the United States Norio Higuchi
2. Formation of trusts and the presumption of settlor’s intent Xiaotong Wen
3. Comment on the discussion of testamentary capacity: Consideration of American law counterparts Keisuke Nonoue
4. Possibility of electronic wills and reconsideration of testamentary forms Sakiko Miyamoto
5. Declaration of trusts: its use for the replacement of wills and solutions of its problems Kazuaki Tanaka
6. Recent trends on the mandatory arbitration clause in American trusts Shuichi Takahashi

Case Notes

1. Testamentary freedom and its limitations; Shapira v. United National Bank, 315 N.E.2d 825（Ohio C.P. 1974） Norio Higuchi
2. Revocation and modification of trust; Patterson v. Patterson, 266 P.3d 828（Utah 2011） Norio Higuchi
3. Trust substituted for wills and forced share: Protection of survived spouse on the elective share and property other than probate estate; Sullivan v. Burkin, 460 N.E.2d 572（Mass. 1984） Masayuki Tamaruya
4. Removal of trustee; Davis v. U.S. Bank National Association, 243 S.W.3d 425（Mo. App. 2007） Tomomi Otsuka

Members

• Tomomi Otsuka (Osaka University)
• Xiatong Wen (Tohoku University)
• Akira Kamo (University of Tokyo)
• Hiroyuki Kansaku (University of Tokyo)
• Shuich Takahashi (Senshu University)
• Masayuki Tamaruy (University of Tokyo)
• Keisuke Nonoue (Ryukoku Univesity)
• Sakiko Miyamoto (Kanazawa University)
• Kazuaki Tanaka (Trust Mirai Forum)
• Shinobu Nagaya (Mitsui Sumitomo Trust Bank)
• Norio Higuchi (Musashino University)

By Yoshihisa Nomi, Prof. Emiritus, Tokyo University(eds.) , representing the study group.
In recent years active theoretical discussions can been seen in the English trust law. Behind this is the change of the English society and economy. The trust law is struggling to adapt itself to the new situation. From this viewpoint we selected several topics which reflect the social dynamism and the corresponding legal developments of the law of trusts.
The selected topics were ; (1) Certainty of the trust property, (2) Basic effects of trusts, in particular, tracing and following, (3) Liability of the trustees, especially the equitable compensation for breach of trust, (4) Disgorgement of profits, (5) Remedies for knowing receipt, (6) Legal effects of beneficial interest, its historical development and the influence of the analytical jurisprudence, (7) Various types of trusts, such as resulting trust, discretionary trust, and settlements, (8) The off-shore trust and the new development in the trust law. Though we handled all these topics in our project, unfortunately not all of them are published in this volume.

Contents

1. The nature of the beneficial interest and the legal effects: Historical Development
   Xuelian JIANG and Yoshihisa NOMI
2. Remedies for breach of trust, equitable compensation and other remedies
   Yoshihisa NOMI
3. Disgorgement of Profits
   Taro NAKAHARA
4. Liabiities of the third parties related to the breach of trust; Knowing receipt and dishonest assistance
   Taro NAKAHARA
5. Settlements
   Masayuki TAMARUYA
6. Unit trust in Cayman and England
   Kazuaki TANAKA

By Prof.Hiroto Dhogauchi(eds.) and other 6 members
This study is a collection of five papers which are products of our research project from May 2019 to March 2021. The aim of our research is to discuss several current problems on trusts selected by each member. All of the selected problems deal current legal topics, and have close relation with the fundamental principles of trust law. First report on the opposition and publicity of trust property discusses the relation between fundamental principles of real propert and ones of trust law. Second report on directed trust, and forth report on duty of equality and fifth report on redemption right all relate trust law and mandate law. Each paper in this study examines basic and important issues.

By Prof.Atsushi Kinami & Prof.Takeshi Sakuma(eds.) and other 7 members
This study is a collection of nine papers which are products of the collaborative research project to investigate legal rules relevant to wealth management, wealth transmission and trusts. Japan has been experiencing the challenge of demographical graying with fewer children. Globalization and technological innovations have also posed challenges to Japan as elsewhere in the world. These challenges inevitably make it necessary to reconsider many legal rules governing wealth management, wealth transmission and trusts. Each paper in this study spots and examines important issues arising in the reconsideration of such legal rules in Japan and elsewhere.

By Prof.Makoto Arai(eds.) and other 10 members
Trusts can be used to manage the assets of the elderly or disabled. It is arguably important to enable trusts to respond to varied individual needs; trusts are ordinarily individual matters and their use should center on personal trusts. Thus far, however, in Japan the focus of the trust business has been on collective trusts – a situation which makes it difficult to claim that personal trusts have developed sufficiently. Given Japan’s ageing society, it is desirable that the trust business evolves to encompass personal trusts. To this end, it is necessary not only to promote awareness of the trust banks that carry out trust business, but also to launch a debate as to the best way to regulate the supervisory authorities. Although trusts are a system for managing assets, they are not a system for personal affairs; there is therefore a risk that that using trusts may cause the personal welfare aspect of asset management to be neglected. It is difficult in personal trusts to distinguish between asset management and personal affairs; but such a distinction is unnecessary.　For example, the purpose of a special donation trust is to contribute to the stable life of a beneficiary who is a person with special disabilities. However, this is not purely a matter of asset management; it is also a matter of personal affairs. It is unnecessary for the trustee to take direct responsibility for the care of the beneficiary; but because personal welfare matters are inevitably linked to the management of the trust assets, a forward-looking stance is essential for the future popularization of personal trusts. At the very least, it should be entirely possible (eg. through coordination with adult guardianships under civil law) to position trusts within the support system that is provided for all aspects of the lives of the elderly people who are the beneficiaries. Furthermore, in order to popularize personal trusts, Japan must establish an understanding of the need to pay appropriate trust fees. The notion that welfare is a benefit provided by the government must be eradicated; a change of perception is required, whereby users understand more about how to ‘buy` personal trusts. This will doubtless correspond with an increasing tendency for the trust business to be a fee-paying business. Of course, there will naturally be a need for settlors to develop their knowledge of personal trusts as fee-paying trusts and to share this knowledge with users. Finally, in order to popularize personal trusts, it will be necessary to nurture corporate trustees that can execute such trusts in an appropriate manner. New developments regarding personal trusts have emerged in recent years. The first is the education fund donation trust: a new form of trust designed to transfer assets of the elderly to younger generations and support education and human resources. This was introduced pursuant to the tax exemption measures on donations relating to one-off education fund donations, in tandem with revisions to the taxation system in 2013. For example, in the event that grandparents create a trust and appoint a trust bank as trustee for educational funds, of which the beneficiary is a grandchild, and entrust the bank with cash, sums of up to \15million will be exempt from donation tax. Trusts such as this are typically personal trusts and are often mentioned in UK and US textbooks on trust law. The second type of trust users special contract cash trust schemes to help systematically distribute funds for everyday life. The settlors deposit funds for day-to-day life in a cash trust and receive regular payments to cover their living costs as the beneficiaries( self-benefit trusts ). When the settlor begins to inherit, a beneficiary, designated by the settlor from among the heirs presumptive, receives a one-off payment. After the settlor has begun to inherit, a person designated by the settlor from among the heirs presumptive to receive the residual funds receives the residual funds of the trust. These two types of trust represent a significant contribution to the development of personal trusts in Japan and their future direction merits close attention.

By Prof. Norio Higuchi(eds.) and other 8 members
This publication is a study report of 9 members, 8 legal academics and 1 banking practitioner, and includes 9 articles on the theme of wills alternatives in the United States, Australia, France and Germany and other trust related issues from a comparative perspective. One paper is written in English, though the others in Japanese. This study group took keen interest in the development of the will alternatives in foreign countries, particularly the role of trusts in common law countries. In the fall of 2017, we began to study by choosing as a text, Alexandra Braun & Anne Röthel eds., Passing Wealth on Death: Will-Substitutes in Comparative Perspective (Studies of the Oxford Institute of European and Comparative Law) (Hart Pub. 2016), and selected reading materials in it to discuss the meaning and importance of the new device for succession in each country. After finishing the book, each of us reported on the trust related issues from a broader point of view, such as the relationship of trust and corporation, ESG investment and fiduciary duties and so on until the fall of 2019. We thank for great support by the Trust Forum Foundation and would continue to keep interest in the development of trusts in foreign countries which we do believe is relevant to the development of laws of trust in Japan.

By Prof. Hiroto Dogauchi (eds.) and other 7 members
It is often pointed that there are not enough clear rules on execution of will, qualified acceptance of inheritance and separation of inherited property in Japanese Law, which causes a lot of legal problems. For ameliorating this situation, our study group is to research will execution problems, including rules on treating testators’ debts, in civil law countries (France, Germany, and Austria) and common law countries (UK and US), especially through visiting professionals in these countries.

By Prof.Atsushi Kinami & Prof.Takeshi Sakuma (eds.) and other 6 members
This study is a collection of eight papers which are products of the collaborative research project to investigate important legal issues arising when trusts are employed in the management of assets and those arising when use of trust for family wealth transmission are more frequently witnessed after the recent trust law revision in Japan. Some papers inquire into important legal issues when trusts are employed to manage assets in general, and the others investigate newly arising issues found in intersection of the general law of successions and the use of trust in family wealth transmission.

By Prof. Minoru Nakazato (eds.) and other 5 menbers
Taxation on wealth transfer through a trust is an important and complicated topics in taxation. Our study group of seven tax law specialists explore taxation on wealth transfer from the viewpoints of trust law, local taxation, international taxation and economic analysis of law. Our group have published the four reports since 2011.

• Taxation on Financial Transactions (1), 2011
• Taxation on Financial Transactions (2), 2012
• Taxation on Financial Transactions (3), 2014
• Taxation on Financial Transactions (4), 2016

This is the fifth report of our study group. This report includes the following topics: legal criteria for judging whether a contract is onerous or gratuitous, constitutional law and international norm, income tax adjustment for inheritance tax, confidentiality of information about a taxpayer’s affairs, taxation on Sovereign Wealth Funds, regional cost-of-living adjustment under Japanese tax system.

By Prof. Hideki Kanda(eds.) and other 6 menbers
Trusts are subject to regulation, which includes the Trust Business Act, the Act on the Trust Business by Financial Institutions, and the Financial Instruments and Exchange Act (FIEA). The FIEA regulation of trusts is highly complex and its relationship with other regulatory laws sometimes raises difficult issues in theory and practice. In our study group, six experts identify issues in the selected FIEA areas and suggest solutions to the problems that may arise in the application of the FIEA to trusts.

By Prof. Yoshihisa Nomi(eds.) and other 5 menbers
The legal device of a trust plays an important role in wealth management and wealth transfer to the next generation. In wealth management of elderly people it competes with guardianship, durable power of attorney or mandate contract. In wealth transfer a trust can be compared with testamentary will. donatio causa mortis, life insurance and other legal institutions. Our study group of eight trust law specialists explore each legal institution and clarify the distinctive feature of trusts, including tax law perspective.

By Prof. Atsushi Kinami & Prof.Seiichi Yamada (eds.) and other 5 menbers
This is a collection of seven papers which are products of the collaborative research project to investigate legal responsibility and powers of trustees and other persons who administer schemes of asset management. The increasing value of assets thus managed and their societal importance require better understanding of their legal responsibility and powers. Some papers approach the issues by means of comparison of law governing trust administration with laws governing those asset management schemes; the others compare such regulations with those under foreign laws.

By Prof. Seiichi Yamada(eds.), Takuya Hatta, Satoshi Aoki et al.
This report is the result of a discussion of important issues in the area where trust law and civil procedure law intersect. The specific themes are as follows: relative effect principle in cancellation of fraudulent trust, restrictions on compulsory execution of property belonging to trust property,

By Prof. Minoru Nakazato (eds.) and other 6 menbers
Taxation on wealth transfer through a trust is an important and complicated topics in taxation. This is the forth report of our study group. Our study group of seven tax law specialists explore taxation on wealth transfer from the viewpoints of trust law, legal local taxation, international taxation and economic analysis of law. Since taxation is based on economic transactions, tax law scholars need to consider taxation based on the private law analysis of the transactions, and take into account economic implications of taxations. This report includes the following topics: theoretical analysis of pro forma corporate taxation, definition of foreign source income, perspective on CBIT (comprehensive business income tax) and BEIT (business enterprise income taxation), deemed inheritance and trust, exit taxation, taxation on hybrid entity, legal policy andbehavioral science on retirement savings.

By Prof. Minoru Nakazato (eds.) and other 6 menbers
Taxation on wealth transfer through a trust is an important and complicated topics in taxation. This is the third report of our study group. Our study group of seven tax law specialists and one corporate law specialists explore taxation on wealth transfer from the viewpoints of trust law, trust taxation, international taxation and economic analysis of law. Since taxation is based on economic transactions, tax law scholars need to consider taxation based on the private law analysis of the transactions, and take into account economic implications of taxations. This report includes the following topics: legal analysis of incorporated foundation as a trust, foreign tax credit for a branch, fundamental analysis of “Super-Matching” rule, U.K. tax reform under UCITS IV, legal interpretation of government-private contracts in American law, reconsideration of income attribution, and age-based taxation.

By by Prof. Hiroto Dogauchi (eds.) and other 6 members
The aim of our study group is to discuss several current problems on trusts. The topics were selected by each member. However, the content of this joint reports clearly shows the list of current important problems: Information as trust property, Trust as a vehicle for Employee Stock Ownership Plan, Transfer of ownership as Security and Trust, Cancellation of Fraudulent Trust and Civil Law, The Conceptual Relationship of Duty of Loyalty and Duty of Care, Remedies for Acts Conducted by Trustee beyond Their Powers, Fiduciary Liability in Securitization.

By Prof. Atsushi Kinami & Seiichi Yamada (eds.) and other 6 members
This is a collection of eight papers which are products of the collaborative research project to investigate legal position of trustees and other persons who administer schemes of asset management. The important role they play in contemporary life requires a fuller inquiry into the legal position of persons in this position and its relevance in choice of scheme for asset management. Individual papers tackle important issues posed by use of those schemes by means of inter-schematic comparison and comparative law.

By Prof. Hiroto Dogauchi (eds.) and other 7 members
In analyzing trust law, our study group focused on the basic principles in Civil Law and Bankruptcy Law. Our research topics are: Nullity and Avoidance of Trust, Patrimoine Theory in France and Obligations Covered by the Trust Property, Discussion on Property and Trust for Understanding Chinese Trust Law, Bankruptcy Remoteness in Declaratory Trust, Liability of Trustee as an owner of Structure on Land, The Relationship of Debt of Former Trustee and Liability of New Trustee, Set-off of deposit refund claim regarding advance payment of public works and bankruptcy, Constructive Trusts and Insolvency.

By Prof. Minoru Nakazato (eds.) and other 6 menbers
Taxation on wealth transfer through a trust is an important and complicated topics in taxation. In private law, wealth transfer without payment might be an exceptional case. In tax law, such transfer has been an important issue. Our study group of six tax law specialists explore taxation on wealth transfer from the viewpoints of estate tax, gift tax, income tax and corporate tax. To get a new perspective on wealth transfer taxation, our study group address a fundamental issue on each topics. This report includes following topics: advantageous issuance of new shares and taxation of beneficiaries, gratuitous transaction and considerations, legal distinction between donation and expenditure for self-benefit, intergenerational transfer through public trust foundation, taxation on beneficiary continuous trust, timing of taxation on estates and gifts.

By Prof. Kiyoe Kado (eds.) and others
In Japan, trust created by way of declaration of trust had not been admitted. But amended Trust Act, which has come into effect as of September 30th 2007, has admitted creation of trust by way of declaration of trust, which it has called “ Jiko Shintaku“. Our study group has picked up several areas, for examples, securitization of debts, business trust, and family trust, where Jiko Shnitaku can be made use of and has studied many problems awaiting solution from the aspect of not only Trust Act but also Trust Business Act, Tax Law and accounting.

By by Prof. Hiroto Dogauchi (eds.) and other 6 members
After the enactment of new Trust Act in Japan, there have appeared a lot of articles and books which analyzed the act from practical point of view. However, in order to build the stable basis for practice, the academic and theoretical analysis is also required. The members of our study group share such common awareness of the issue, and the following topics have been selected. The Qualification of Legal Situation as Trust, Declaratory Trust of Claims with Restraint of Alienation, Trust of Leased Estate and Security Deposit, Asset Protection Trust, Claim of Trust Creditors and Trustee in Bankruptcy of Trust, Liability of Trustee against Third Parties in Limited Liability Trust, Purpose Trust.

By Prof. Norio Higuchi (eds.) and other 8 members
From the fall of 2007 through the summer of 2009, nine legal scholars and practitioners gathered once a month to discuss trust related issues. This group was named the research group on American law of trusts and supported by the Trust Forum Foundation. Their interest was not limited to the United States, however, and the collection of 9 articles here as the outcome of research includes a paper on the England law, the country of origin of the trusts.
These papers are diverse in contents and themes but common in one point. The members have enthusiasm and academic curiosity in the variety of uses of trusts in the United States and other common law countries, which are relevant to Japanese law. The Japanese Trust Act was completely amended in 2006. As a result, one paper was on the declared trust in the United States, since this type of trust formation was newly recognized in Japan by the 2006 amendment of Trust Act. Also, another paper was on the duty of impartiality, which was expressly enacted by the new Act. A third one is comparison of the tax effects of successive transfer of beneficiary rights between the U.S. and Japan, and this is also recognized by the new Act.
We would like to express our deep thanks for the support of the Trust Forum Foundation and hope for the development of the uses of trusts in Japan.