2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition of imposing global income tax of KRW 58,022,280 (including additional tax) for the Plaintiff on December 7, 2016 shall be revoked.

A. The Plaintiff was granted a stock option of 50,000 shares of the instant company on February 26, 2010 while working in the OO Co., Ltd. (hereinafter “instant company”).

B. On July 31, 201, the Plaintiff: (a) exercised the appraisal right for 50,000 shares of the instant company on February 27, 2012 (hereinafter “instant shares”); (b) sold the instant shares in entirety from March 23, 2012 to March 27, 2012; and (c) recognized profits from the exercise of appraisal rights as at the time of sale (average value of 12,380 won per share; total amount of 459,000,000 won per share); and (d) filed an integrated income tax for the year 2012.

C. On December 7, 2016, the Defendant calculated the Plaintiff’s income to the Plaintiff as at the time of exercising appraisal rights rather than at the time of selling the instant shares, and notified the Plaintiff of the rectification and notification of the global income tax of KRW 58,022,280 (including additional tax) for the year 2012 as prescribed in Article 21(1)22 of the Income Tax Act (hereinafter “instant disposition”).

D. The Plaintiff filed an objection with the Tax Tribunal on March 8, 2017, but was dismissed on September 18, 2017.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 6, 7, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) In light of the fact that the Plaintiff exercised stock options after retirement of the instant company, and the instant company is a stock-listed corporation, the income should be calculated as of the time when the Plaintiff sold the instant shares, and thus, the instant disposition was unlawful on a different premise.

2) If Article 38(1)17 of the Enforcement Decree of the Income Tax Act applies to this case, the Plaintiff may exercise the appraisal right and dispose of the instant shares after the lapse of a certain period after the instant company requested the Korea Securities Depository to issue new shares. Thus, it is impossible to dispose of the shares, which is a non-assignable shares, thereby infringing the property right excessively by excessively infringing the property right.

B. Relevant provisions

It is as shown in the attached Form.

(c) Fact of recognition;

1) The main contents of the stock option agreement between the Plaintiff and the instant company are as follows.

A and B (Plaintiffs) enter into an agreement as follows with respect to matters necessary for Gap to grant the stock options as stipulated in Article 189-4 of the Securities and Exchange Act (hereinafter referred to as “the option”) to Eul by a resolution of the general meeting of shareholders on February 26, 2010:

Article 1 [Types and Number of Shares to be Issued by A] The shares to be delivered by A for the exercise of options shall be 50,000 registered ordinary shares issued by A.

Article 2 (Method of Granting Right of Option) B When exercising Right of Option, A shall issue the shares referred to in paragraph (1).

Article 4 [Exercise Price] The amount per share to be paid to A in exercising the option (hereinafter referred to as "exercise Price" in this Schedule) shall be KRW 8,000.

Article 5 [Adjustment of Exercise Price and Number of Shares to be Granted] (1) If, after the date of grant of option, A changes in the matters of capital or issuance of shares before the date of exercise of the option, before the date of exercise of the option, A shall adjust the number of shares to be granted under Article 1

1. Where reserve funds are transferred into capital: The exercise price shall be adjusted as follows:

The value of exercise after adjustment = The value of exercise before adjustment* [(the number of issued stocks + the number of issued stocks)*1 per share] / the market value] / (the number of issued stocks + the number of issued stocks)

2. In cases of share split: The exercising price shall be reduced at a rate equal to that of the par value divided, and the number of shares to be delivered shall be reduced by the calendar of the par value divided;

3. In cases of consolidating stocks: The exercise price shall be increased at the rate equivalent to the consolidation ratio of par value, and the number of shares to be delivered shall be reduced by the calendar ratio of par value.

4. Where the total number of stocks issued is reduced by reducing capital, retirement of profits, or redemption of stocks to be issued: The number of stocks to be issued shall be reduced at the same rate as the reduction rate of the total number of stocks issued and outstanding, and the exercising price shall be adjusted in the following formula: Provided, That the exercising price after adjustment shall be not less than the price calculated by applying mutatis mutandis Article

The value of exercise after adjustment = The value of exercise before adjustment* [(the number of existing shares - the number of decrease)*1 share refund value] / market value] / (the number of existing shares issued - the number of decreased shares)

(2) Mediation referred to in paragraph (1) shall be conducted without any separate procedure when any of the causes referred to in the subparagraphs of paragraph (1) occurs. In such cases, A shall be notified to B without delay.

Article 6 [Period of Exercise] The option shall be exercised from February 26, 2012 to February 26, 2015, and no option which has not been exercised during this period shall be deemed to have been granted.

Article 7 [Method and Procedure for Exercising Right] (2) Where B intends to exercise the option, B shall enter the kind and number of shares to exercise the option in two copies of a request for the issuance of new shares prepared by A, and shall submit Gap a signature and seal or signature and submit them to A, and pay the exercise price under Article 4 or the exercise price adjusted under Article 5 to A to a bank designated by A.

Article 8 (Effect of Exercise of Right of Option) B shall become a shareholder of A from the time of payment under Article 7 (1): Provided, That the voting shall not be exercised at a general meeting of shareholders during the closing period of the register of shareholders.

2) On February 27, 2012, the Plaintiff exercised the stock option on the following terms: 50,00 shares for the instant company: 3,200 shares for event price: 3,200 won for shares payment: 160,000 won for shares payment: 00-00-00 for shares payment application account: 00-000 for shares payment (AAAA securities).

3) On March 14, 2012, the instant company requested the Korea Securities Depository to issue new shares to 38,000 shares, including the instant shares, and the main contents are as follows.

4) On March 21, 2012, the Plaintiff received the instant shares and sold them as follows.

5) The market price per stock of the instant company is as follows based on the Plaintiff’s appraisal right date, order date, and settlement date.

6) On the other hand, the instant company calculated the Plaintiff’s income amount of KRW 560,00,000 (=50,000 x (14,400 x (14,400 x (1) - 3,200 2)) and applied the tax rate of KRW 20,000, and withheld KRW 123,200,000, total of income tax of KRW 112,000 and local income tax of KRW 11,20,000.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 2, 3, 6, 8, Eul evidence Nos. 1 and 3, the purport of the whole pleadings

D. Determination

1) Determination on the first argument

A) Article 21 (1) of the Income Tax Act provides that "other income is income, other than interest income, dividend income, business income, labor income, annuity income, retirement income, and capital gains, which is prescribed in the following subparagraphs." Article 21 (2) of the Income Tax Act provides that "the stock options granted before retirement are exercised after retirement or by exercising them after being granted without an employment relationship."

On the other hand, in order to ensure that income subject to income tax has been realized, even if it is not necessary until it is realized, it is considerably mature and confirmed in the possibility of realizing the income, and it is merely established without reaching such a degree (see, e.g., Supreme Court Decision 2001Du7176, Dec. 26, 2003). The stock option is entirely entrusted to the choice of the officer or staff who has been granted the stock option, so it cannot be deemed that any income has accrued merely by granting the stock option, and since economic profit equivalent to the difference between the market price and the market price of the relevant stocks is determined or realized only by acquiring stocks by exercising the stock option, it shall be deemed that the income has accrued at the time of the above exercise (see, e.g., Supreme Court Decision 2007Du5172, Nov. 15, 2007).

B) On February 27, 2012, in light of the above facts, the Plaintiff’s economic interest equivalent to the difference between the market price and the exercise price of the stock option was determined or realized as a result of exercising the stock option with respect to the instant company on February 27, 2012. Therefore, the instant disposition is lawful, and the Plaintiff’s assertion on a different premise is without merit (the Plaintiff’s calculation of income at the time of selling the instant stocks). However, Article 21(1)22 of the Income Tax Act provides that the Plaintiff shall calculate income as at the time of exercising the stock option; Article 163(13) of the Enforcement Decree of the Income Tax Act provides that the market price at the time of exercising the stock option shall be the acquisition price when transferring stocks acquired by exercising the stock option in calculating capital gains; the Plaintiff could have exercised the stock option as a shareholder of the instant company; and the Plaintiff’s assertion as at the time of exercising the Plaintiff’s stock option cannot be accepted in light of the fact that the instant company also exercised the Plaintiff’s stock option as at the time of withholding.

2) Judgment on the second argument

A) Article 20(3) of the Income Tax Act provides that "the necessary matters concerning the scope of the earned income shall be prescribed by Presidential Decree", and Article 38(1) of the Enforcement Decree of the Income Tax Act provides that "the earned income under Article 20 of the Act shall include the following income," and subparagraph 17 of the same Article provides that "the stock options granted to an executive officer or employee of a corporation or a related corporation under Article 87 of the Enforcement Decree of the Corporate Tax Act with the corporation, etc., during the period of his/her work (the difference between the market price at the time of exercising the stock option and the actual purchase price at the time of exercising

B) On the other hand, according to the above facts, the Plaintiff’s exercise of stock options granted by the instant company after his retirement does not apply to Article 38(1)17 of the Enforcement Decree of the Income Tax Act. Furthermore, even if the Plaintiff’s exercise of stock options after his retirement is intended to determine the difference between the market price at the time of the exercise of stock options and the exercise price (actual purchase price) in calculating profits under Article 21(1)22 of the Income Tax Act, as Article 38(1)17 of the Enforcement Decree of the Income Tax Act, the Plaintiff’s exercise of stock options is unconstitutional because it excessively infringes on property rights, the issue of whether the scope of capital gains subject to taxation should be limited to income or not or should be included in the calculation of the market price at the time of the exercise of stock options is difficult, in light of the purpose of taxation, characteristics of taxable income, and problems on taxation techniques, and it is difficult to view that the Plaintiff’s exercise of stock options without cash should be subject to taxation, and thus, it does not seem that the difference between the market price and the exercise price is unconstitutional.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

1) Closing on February 27, 2012, the time of exercising the Plaintiff’s appraisal right

2) The Plaintiff’s exercise price of appraisal right