1. Regarding ground of appeal No. 1

A. Article 80(1) of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter “the Act”) provides that the amount of liquidation income due to a merger of a domestic corporation shall be calculated by subtracting the total amount of equity capital of the merged corporation as of the date of the registration of the merger from the total amount of the cost of the merger received by the stockholders, etc. of the merged corporation from the merged corporation. Article 80(2) of the same Act provides that in calculating the total amount of the said cost of the merger, where the merged corporation acquires stocks, etc. of the merged corporation (hereinafter “combined stocks, etc.”) within two years prior to the date of the registration of the merger and delivers stocks, etc. of the merged corporation, the amount of liquidation income due to the merger shall be added to the “total amount of the cost of the merger received by the stockholders, etc.

However, the proviso of Article 122(1)2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008; hereinafter “Enforcement Decree”) which determines the method of calculating liquidation income through a merger upon delegation under Article 80(4) of the Act shall not be the merged corporation and the extinguished corporation as at the time the merged corporation acquires combined stocks, etc. from stockholders, etc. of the extinguished corporation under Article 80(2) of the Act from stockholders, etc. of the extinguished corporation (a). (2) The merged corporation shall acquire the total amount of stocks of the merged corporation (b) equivalent to 95/100 or more of the transfer amount of the combined stocks, etc. (referring to the stocks newly issued by the merged corporation, etc.); and (3) Where the merged corporation satisfies all the requirements of Article 44(1)1 and 2 of the Act (c) of the Act, the acquisition value of the merged corporation plus the acquisition value of stocks, etc. under Article 80(2)12(1)2) of the Enforcement Decree.

As can be seen, special cases concerning the calculation of the acquisition value of combined stocks, etc. added to the liquidation income amount from a merger under the proviso to Article 122(1)2 of the Enforcement Decree of the Act are to be made. In order to prevent such merger corporation from unfairly evading the corporate tax burden on liquidation income by acquiring stocks of the merged corporation prior to the merger and not delivering the stocks of the merged corporation, the acquisition value of the relevant combined stocks shall be added to the total amount of the merger cost. However, in cases where the stockholders of the merged corporation acquire the stocks newly issued by the merged corporation in return for the transfer of stocks prior to the merger, there is no difference between the merger cost and the acquisition of the stocks of the merged corporation by the stockholders of the merged corporation at the time of the merger, and it is reasonable in light of the fact that it is reasonable to calculate the acquisition value of the merged corporation to the face value of the stocks that the stockholders of the merged corporation acquired at the same time as the liquidation income calculation method at the time of the merger (see Supreme Court Decision 2010Du10662, Feb. 15, 201).

B. In the same purport, the court below rejected the Plaintiff’s assertion that the requirements of Article 122(1)2(b) of the Enforcement Decree of the Act should be applied to the merged corporation’s shareholders on the ground that the total acquisition price of the entire shares of the merged corporation, which were transferred to the Plaintiff as the merged corporation, is less than 95% of the total transfer price, is less than 10% of the total transfer price, and that the special case of the proviso of Article 122(1)2(b) of the Enforcement Decree of the Act cannot be applied to the calculation of liquidation income by merger, and that the disposition of this case, which calculated the liquidation income by the merger, is legitimate, is just, in accordance with Article 80(2) of the Act, by adding the total acquisition price of the entire shares of the merged corporation to the total acquisition price of the total shares of the merged corporation. In so doing, there was no error of

2. Regarding ground of appeal No. 2

The plaintiff asserts that the small big 4 investment association, etc. should be deemed to have acquired the shares of the merged corporation within seven days after May 2007 by transferring the issues and shares of the merged corporation, and contrary to the ground of appeal No. 2 that the judgment of the court below that the small big 4 investment association, etc. did not acquire the shares of the merged corporation within seven days after the date of the transfer of the merged corporation was erroneous. However, as long as the shareholders of the extinguished corporation did not acquire the shares of the merged corporation equivalent to 95/100 or more of the transfer amount of the shares of the merged corporation

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)