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

A.1) On January 16, 2006, the Plaintiff and XX technology investment companies, HanA, GoB, JCC, SongD, NewE, and ParkF (hereinafter collectively referred to as “the transferors of this case”) concluded a share sales contract for sale of 23,000 shares (hereinafter referred to as “the share sales contract of this case”) held by them as shown in Table 1 with O Co., Ltd. (hereinafter referred to as “YYN Entertainment”), a stock-listed corporation (hereinafter referred to as “YN Entertainment”) to sell the total shares of △△△△ Film Co., Ltd. (hereinafter referred to as “△△△△”), as described in Table 1, to sell the shares of 23,00 shares (hereinafter referred to as “the share sales contract of this case”).

2) According to Article 3 (Transfer Price) of the Stock Sales Contract of this case, YN Entertainment, the transferee of this case, paid 000 won in cash to the transferor of this case on the third party’s payment date of YYN Entertainment’s payment of capital increase. The transferor of this case subscribed to YYN Entertainment’s third party allocation of capital increase with the total payment date of YYN Entertainment’s payment of capital increase with the third party allocation (Paragraph 1). The transfer price paid to the transferor of this case is deposited and processed to the transferor’s passbook, and the passbook’s passbook is deposited and managed (Paragraph 2). According to Article 4(3) of the same Act, the transferor of this case guaranteed the full payment of capital increase with the transfer price received from YYN Entertainment’s third party allocation of capital increase.

B.1) Meanwhile, on January 16, 2006, YYN Entertainment held a board of directors meeting to acquire management rights and to diversify the business of YYN Entertainment on an agenda item 1, and passed a resolution to acquire 230,000 shares of △△ film to acquire △△△△’s shares. On the agenda item 2, 10,206,496 shares of registered common shares for redemption of loans related to the acquisition of management rights and for securing future operating funds as shown in Table 2 as shown in Table 2 below. The issue price of new shares shall be issued by the third party allotment method to the transferor and YG, and the issue price of new shares shall be 100 won per share by applying the discount rate of 9.92% per share pursuant to Article 57 of the old Regulations on the Issuance and Construction, etc. of Securities (amended by the Financial Services Commission No. 2008-8 of Apr. 7, 2008; hereinafter referred to as “securities issuance regulations”).

2) Thereafter, on January 25, 2006, YN Entertainment resolved to hold a board of directors to allocate 1,449,275 shares to YH and UN II, respectively, 483,092 shares and 483,091 shares to YJ.

C. On February 10, 2006, YN Entertainment paid 000 won to the transferor in accordance with the instant share purchase agreement. At the same time, the said purchase price was paid as the acquisition price of the instant new shares.

D. On March 13, 2006, after concluding a merger contract with △△ film, YN Entertainment (the trade name was changed to △ Energy Co., Ltd. on August 25, 201, and the trade name was changed to △△, Inc. on February 14, 201), the YN Entertainment entered into a merger on May 19, 2006 and completed the merger registration on May 23, 2006.

E. In evaluating pursuant to Article 29(3)1(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter the same) (amended by Presidential Decree No. 20621, Feb. 2, 2008; hereinafter the same), the Defendant determined that the Plaintiff obtained profit equivalent to the difference by issuing at low price of KRW 000,000, while the value of new shares issued by the YN Entertainment was KRW 00,000, and that on May 1, 201 and May 2, 201, the Defendant issued a disposition imposing a total of KRW 00,000 (hereinafter referred to as “each of the instant dispositions”).

F. On July 28, 2011, the Plaintiff filed an appeal seeking the revocation of each of the instant dispositions with the Tax Tribunal, but was dismissed on December 23, 201.

[Ground of Recognition] Facts without dispute, Gap evidence 1-1 to 8, Gap evidence 2, Gap evidence 3, 4-1 to 4, Eul evidence 5-1 to 1-8, Eul evidence 1-2, Eul evidence 2, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

Each disposition of this case is unlawful for the following reasons.

1) The allegation that capital increase with respect to the instant case constitutes an exchange of part of the merger procedure or shares under the principle of substantial taxation

Y Entertainment decided to convert the type of business into the entertainment business. After the Plaintiff’s conversion into the business, the Plaintiff’s corporate representative director will absorb △△△ film as a representative director. If the process of the merger is complicated, the Plaintiff and the Plaintiff agreed to merge with the method of simplified merger (Article 527-2 of the Commercial Act) and small-scale merger (Article 527-3 of the Commercial Act), which can be substituted by the approval of the board of directors, with the approval of the board of directors. In order to conduct simplified mergers, YYN Entertainment concluded a contract on the instant purchase of 92% of the total number of outstanding shares of △△△ film as a corporate consequence of the merger with the transferor. The Plaintiff acquired new shares through a small-scale merger agreement between the transferor and the transferee to pay new shares for the acquisition price of new shares, and the Plaintiff’s total number of shares, including the new shares, were more than 5% of the total number of shares issued after the merger, and subsequently, YYN Entertainment acquired the new shares.

Therefore, the issue of this case’s offering of new shares, along with the stock sales contract, aims to satisfy the requirements of simple merger and small-scale merger, constitutes a part of the merger procedure. As such, the issue of this case’s offering of new shares, not Article 39 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “the Inheritance Tax and Gift Tax Act”) but Article 38 (Donation of profits from a merger), should be applied. However, a merger between YYN Entertainment and △△ film, constitutes a merger between a stock-listed corporation under Article 38(1) of the Inheritance Tax and Gift Tax Act; Article 28(1) proviso of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 8863, Feb. 29, 2008) and Article 84-7 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 2051, Jan. 18, 2008).

Even if the issue of new shares does not fall under the merger procedure, the Plaintiff transferred the shares of △△ Film through the instant share purchase contract and the instant new shares issued by YY Entertainment, and thus, the instant new shares constitutes an exchange of shares. Therefore, Article 35(2) of the Inheritance Tax and Gift Tax Act and Article 26(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall apply to the issue of new shares issued by the Plaintiff. However, in cases where the Plaintiff regards the price per share of the new shares received by △△△ as KRW 00 according to the Defendant’s assertion, the Plaintiff offered the shares of △△△ film equivalent to KRW 00 (= KRW 4,854,547 KRW 400) to YYN Entertainment’s new shares, and thus, it does not fall under the taxation requirements prescribed in Article 35 of the Inheritance Tax and Gift Tax Act, since the difference in the price per share of △△△’s shares is more than KRW 300,000.

2) The assertion that Article 39(1)1 of the Inheritance Tax and Gift Tax Act is not applicable

Article 39(1) of the Inheritance Tax and Gift Tax Act is based on the premise that the corporation issues new shares to increase its funds, and Article 39(1) of the same Act does not directly aim at raising funds, and Article 39(1) of the Inheritance Tax and Gift Tax Act does not apply to cases where the transfer of management rights or the purpose of tax avoidance is not normal capital increase for the purpose of the merger, but for the purpose of the merger rather than capital increase or the transfer of management rights or the avoidance of tax avoidance. However, Article 39(1)1 of the same Act does not apply to capital increase for the purpose of raising funds.

3) The issue price of new shares issued through the offering of new shares falls under the market price under Article 39(1)1 of the Inheritance Tax and Gift Tax Act, which is calculated in accordance with Article 57 of the Regulations on the Issuance of Securities to the effect that the issue price of new shares

4) The plaintiff's assertion that there is no benefit from acquiring new shares by acquiring them

The Plaintiff sold KRW 000 per share of △△ film to the YY Entertainment. If the Plaintiff received the share purchase price in cash, the Plaintiff would have received KRW 000 (=00 x00). However, the Plaintiff accepted KRW 000 per share of new shares of YYN Entertainment instead of the share purchase price, and caused KRW 000 per share of YYN Entertainment’s acquisition of KRW 4,854,547 of new shares of YYN Entertainment, and due to the limitation on the period of safeguard, etc., the Plaintiff did not dispose of the shares of YYN Entertainment at an early price of less than KRW 00 after a considerable period of time.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) As to the assertion that capital increase with respect to the instant case constitutes a partial merger procedure or an exchange of shares under the principle of substantial taxation

Inasmuch as an economic entity may choose one of the several legal relationships in order to achieve a unified economic purpose in economic activities, if a corporate body intends to merge another corporate body, it may choose a specific method with the approval of the board of directors, taking into account the method of regular merger subject to the approval of the general meeting of shareholders and the degree of the burden of relevant expenses, such as tax, etc., among small-scale mergers, which may replace the approval of the general meeting of shareholders after meeting certain requirements prescribed in the Act. If the corporate body selects a specific method and forms a legal relationship for absorption, the content and scope of the tax resulting from the merger shall be individually determined according to the legal relationship. It cannot be said that the substance is identical or that the same should be treated under the tax law solely on the ground that the ultimate purpose of merger was the merger.

As alleged by the Plaintiff, even if the ultimate purpose of this case’s capital increase with respect to the merger of △△ Film with respect to this case’s purchase and sale of shares was to absorb △△ film, as seen by the Plaintiff, YYN Entertainment’s choice of capital increase with respect to this case’s purchase and sale of shares, as long as the capital increase with respect to this case’s purchase and sale of shares was selected as a merger method, it cannot be deemed that it constitutes a part of the merger process, or that it constitutes a stock exchange. Therefore, the Plaintiff’s above assertion is without merit, as

2) As to the assertion that Article 39(1)1 of the Inheritance Tax and Gift Tax Act is not applicable

In addition, Article 39(1) of the Inheritance Tax and Gift Tax Act does not provide for the purpose of regulating "capital gains or transfer of management rights without compensation or tax avoidance" as well as the fact that the YYN Entertainment held a board of directors meeting on January 16, 2006 and resolved to repay loans related to the acquisition of management rights in △△ film and to raise funds for future operation on the agenda of subparagraph 2. Thus, the Plaintiff's above assertion is without merit (if the Plaintiff does not fall under the issue of new stocks for the purpose of evading transfer of management rights or gift tax, the Plaintiff's response presented by the National Tax Service (438, March 24, 2005) by asserting that the above provision is not applicable to the Plaintiff's issue of new stocks for the purpose of evading the transfer of management rights or the transfer of management rights, and it is difficult to generalize the company reorganization procedure as it is related to the issue of early completion of the company reorganization and the issue of capital increase for the rehabilitation of the company)

3) As to the assertion that the issue price of new shares issued through the offering of new shares in this case conforms to the market price

Article 57 of the Securities and Exchange Regulation provides that the issue value of new shares issued by a stock-listed corporation shall be calculated by applying the discount rate set by the stock-listed corporation, etc. to the base price when a stock-listed corporation, etc. provides that the issue value shall be calculated by applying the discount rate set by the stock-listed corporation, etc. to the base price, but the discount rate shall not exceed 10/100. As seen earlier, the value of new shares issued by a YY Entertainment was calculated as KRW 00 per share by applying the discount rate of 9.92% to the base price under the above provision.

However, Article 57 of the Securities Issuance Regulation is merely a certain limitation on the standard for issuing new shares in order to ensure the fairness and transparency of the terms and conditions of issuance and the solicitation procedure for soliciting subscription, and the issue price of new shares is determined pursuant to the above provision, and it cannot be deemed that there is no profit of donation deemed to be applicable under the Inheritance Tax and Gift Tax Act and the Enforcement Decree of the Inheritance Tax and Gift Tax Act. In addition, in light of the above, it cannot be deemed that the issue price of new shares under the above provision cannot be deemed as the market price under the Inheritance Tax and Gift Tax Act because it is difficult to view that the above provision is preferentially applied to the Inheritance Tax

4) The plaintiff's assertion that there is no benefit from acquiring new shares by acquiring them

Article 39(1)1 (c) of the Inheritance Tax and Gift Tax Act provides that where a third party, other than a shareholder of the relevant corporation, receives a allocation of new shares of the relevant corporation at a price lower than the market price, the amount calculated under Article 39(3) of the same Act and Article 29(3)1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall be deemed as the profit, that is, the gift tax, so long as the plaintiff gets a benefit

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.