The grounds of appeal are examined to the extent of supplement in case of supplemental appellate grounds.

1. Regarding ground of appeal No. 1

A. Article 35(2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006; hereinafter “Gift”) provides that “in case where property is transferred between unrelated parties, the amount equivalent to the difference between the price and the market price shall be presumed to have been donated, and the amount equivalent to the profits prescribed by the Presidential Decree shall be deemed to be the value of donated property to the person who acquired the profits.” Article 26(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by the Presidential Decree No. 19899, Feb. 28, 2007) provides that “any value which is remarkably high” refers to the value of transferred property less the market price (referring to the value assessed under Articles 60 through 66 of the Inheritance Tax and Gift Tax Act) than 30/100 of the market price.

Meanwhile, Article 60(1) of the Inheritance and Gift Tax Act provides that “The value of property on which gift tax is levied shall be based on the market price as of the date of donation.” Article 60(2) provides that “The market price under the provisions of paragraph (1) shall be the value which is generally established in the event of free trade between many and unspecified persons, and shall include the value which is recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the expropriation, public sale price, appraisal price, etc.” In applying the provisions of paragraph (1), where it is difficult to calculate the market price, the market price shall be determined by the methods prescribed in Articles 61 through 65 in consideration of the type, scale, transaction

B. Based on its adopted evidence, the lower court acknowledged the following facts: (a) the Plaintiffs transferred the instant shares, the non-listed shares of which are non-listed shares, at KRW 750,00 per share, to polybol (hereinafter “Pool”) of polybol Co., Ltd., which has no special relation; and (b) the Defendants, based on the value per share of the instant shares assessed under Article 63(1)1(c) of the Inheritance and Gift Tax Act, based on KRW 14,676, deemed that the said shares are transferred to high-priced transfer under Article 35(2) of the Inheritance and Gift Tax Act; and (c) in order to determine whether the instant shares are subject to gift tax as a high-priced transfer under Article 35(2) of the Inheritance and Gift Tax Act, the lower court first determined that the market price of the instant shares should be determined; (c) the burden of proving the market price is on the Defendants, the tax authority, and thus, based on the premise that the gift tax is illegal under Articles 63(1)1)1(c) through 65) of the Inheritance Tax Act.

C. However, in full view of the contents of the above provisions, legislative purport and Article 60(2) of the Inheritance and Gift Tax Act provides that there is no other provision on definition of market price under the Inheritance and Gift Tax Act, Article 60(3) of the Inheritance and Gift Tax Act provides for an alternative in the case where it is difficult to compute the market price under Article 61 through 65 of the Inheritance and Gift Tax Act, and Articles 61 through 65 of the Inheritance and Gift Tax Act provide for the method of reasonably estimating the market price, it is reasonable to view that the value assessed by the methods under Articles 60(3) of the Inheritance and Gift Tax Act not only falls under the market price that serves as the basis for calculating the value of the property on which the gift tax is levied, but also falls under the market price that becomes the basis for determining whether the property is subject to gift tax under Article 35(2) of the Inheritance and Gift Tax Act.

D. Nevertheless, for reasons indicated in its reasoning, the lower court determined that the value assessed by the method under Article 63(1)1(c) of the Inheritance and Gift Tax Act on the instant shares cannot be deemed as an elevated transfer under Article 35(2) of the Inheritance and Gift Tax Act, based on the value assessed by the method under Article 63(1)1(c) of the Inheritance and Gift Tax Act. In so doing, the lower court erred by misapprehending the legal doctrine on “market price” under Article 35(2) of the Inheritance and Gift Tax Act, thereby adversely affecting the conclusion of the judgment. The

2. Regarding ground of appeal No. 2

A. As gift tax and capital gains tax vary between the requirements and timing for establishing tax liability and taxpayers, in a case where the tax authority imposes each disposition, it is not possible to impose both taxes, unless there are special provisions excluding duplicate application. Even if Article 2(2) of the Inheritance Tax and Gift Tax Act provides that gift tax shall not be imposed on a donee when income tax is imposed on a donee pursuant to the Income Tax Act, it does not fall under any special provisions excluding overlapping application of capital gains tax and gift tax (see Supreme Court Decisions 98Du11830, Sept. 21, 1999; 2003Du11575, Dec. 10, 2004).

B. According to the facts duly established by the court below, as to the plaintiffs' transfer of the shares of this case at a high price before polysure, the defendants made the instant disposition imposing gift tax on the difference between the actual transfer value of the shares and the appraised value according to the method of Article 63 (1) 1 (c) of the Inheritance and Gift Tax Act. On the other hand, the appraisal value is the transfer value and the transfer income tax is imposed (as for the plaintiff 1, 2, and 3 who reported transfer income according to the original actual transfer value, the reduction or correction is made according to the appraised value).

C. Examining these facts in light of the aforementioned legal principles, the instant disposition and the imposition of capital gains tax cannot be deemed to constitute double taxation on the grounds that the subject of taxation differs, and thus, the instant disposition cannot be deemed to have violated Article 2(2) of the Inheritance and Gift Tax Act.

D. Nevertheless, the lower court determined that the Defendants imposed gift tax and transfer income tax by dividing the income section into income sections was unlawful on the grounds as stated in its reasoning. It erred by misapprehending the interpretation of Article 2(2) of the Inheritance and Gift Tax Act, thereby affecting the conclusion of the judgment. The grounds of appeal assigning this error are with merit.

3. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)