2016Guhap51540 Revocation of Disposition of Imposition of Gift Tax

1.A

2.B

Chuncheon Director of the Tax Office

9 June 2017

July 7, 2017

1. The Defendant’s gift tax of KRW 81,004,660 on January 14, 2016 against Plaintiff B, and the Plaintiff A

portion exceeding KRW 35,792,130 out of KRW 71,068,350 of the gift tax for the year 201

Each disposition of imposition shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On November 21, 201, 201, the Plaintiffs respectively acquired 36,00 shares of D (Plaintiff B) and 12,000 shares (Plaintiff A), respectively, from Plaintiff B’s spouse, the father of Plaintiff A (hereinafter “instant company”) from Plaintiff B (hereinafter “instant shares”) (hereinafter “instant shares”)

B. On January 14, 2016, the Defendant deemed the Plaintiffs to have donated the instant shares to C, and calculated the appraised value of the instant shares as KRW 25,034 per share pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23527, Jan. 25, 2012; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”). On January 14, 2016, the Defendant imposed the Plaintiff KRW 81,004,660, and KRW 71,068,350, respectively, on the Plaintiff (hereinafter “instant disposition”).

C. The Plaintiff filed an appeal with the Tax Tribunal on April 18, 2016, but was dismissed on July 8, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 2, 6 evidence, Eul evidence 1 to 3 (including a lot number, hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The instant company disposed of tangible assets in 2009 and obtained profits from 273,525,915 won, but this is a case where the net profit and loss for the recent three years is gradually increased due to the temporary and friendly circumstances. Therefore, it is unreasonable to calculate per share value on the basis of the weighted average amount of net profit and loss for the recent three years pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance and Gift Tax Act.

B. Relevant statutes

It is as shown in the attached Form.

C. Relevant legal principles

Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter referred to as the "former Inheritance Tax Act"), which provides for the supplementary evaluation method of unlisted stocks, and Article 54 of the former Enforcement Decree of the former Inheritance Tax and Gift Tax Act provides that the net value per share of unlisted stocks shall, in principle, be the average value of profit and loss per share (the weighted average value of net profit and loss per share for the last three years: the interest rate determined and announced by the Minister of Strategy and Finance in consideration of the distribution rate of the company bonds with three years maturity guaranteed by the financial institution) and the net asset value per share (the net asset value of the relevant corporation: the total number of issued stocks) by 3 and 2.

Article 56 (1) of the former Enforcement Decree of the Inheritance and Gift Tax Act provides that when calculating the net profit and loss per share in the preceding three years, "the weighted average amount of the net profit and loss per share in the preceding three years" shall be the value under subparagraph 1, i.e., [3] + (1 net profit and loss per share in the business year that has become one year before the base date of appraisal x 2) + (1) net profit and loss per share in the business year that has become two years before the base date of appraisal x 1/6] + (1) an weighted average amount of the profit and loss per share in the latest three years before the base date of appraisal x 6] calculated by the formula of 1/6" (hereinafter referred to as "net weighted average amount of profit and loss") in the preceding three years by a corporation at one time in the preceding three years, it is unreasonable to evaluate the value under subparagraph 1 for reasons such as abnormal increase in the amount of profit and loss per share in the preceding three years, the weighted average amount of profit and loss per share in the preceding 2.

Meanwhile, it is desirable to calculate the net value of unlisted stocks by the method of assessing the current value after estimating the future profit and loss of the stocks. However, Articles 54(1) and 56(1)1 of the former Enforcement Decree of the Inheritance and Gift Tax Act provide that the net value per share shall be calculated by applying the "average average amount of net profit and loss for the last three years per share, which is the past performance, in principle, for the preceding three years. As such, substitution of future profit and loss with the past performance is premised on the premise that the past performance continues to continue in the future (see, e.g., Supreme Court Decision 2011Du9140, May 24, 2012). If it is deemed unreasonable to estimate that the preceding performance will not reflect the future profit and loss in the preceding three years' average average amount of net profit and loss for the preceding three years, which is anticipated to continue to continue in the future, it is reasonable to determine that it is an exception to each subparagraph of Article 17(1)15(2) of the former Enforcement Decree of the Tax Act.

(d) Facts of recognition;

The following facts are acknowledged according to the facts without dispute, Gap evidence Nos. 1, 8, Eul evidence Nos. 4 and 5, and the purport of the whole pleadings.

(1) The instant company is a company engaged in interim treatment business specializing in crushing of construction wastes, collection and transportation business, recycling business, etc.

(2) On March 30, 2009, the instant company sold 1 unit of construction equipment (E), 1 unit of construction equipment on April 1 of the same year (F), 1 unit of construction equipment on May 30 of the same year (G), and 1 unit of truck on December 22 of the same year (H) respectively.

(3) The annual corporate tax deductions from 2005 to 2016 of the instant company’s profits and losses are as follows.

A person shall be appointed.

(4) The annual tangible asset disposal profits and losses of the instant company from 2005 to 2016 are as follows:

A person shall be appointed.

2016 109,173,923 109,173,923

(5) The present value of the instant company’s 2005 to 2016 on the list of the total depreciation costs adjustment by the company’s 2005 to 2016 is as follows:

A person shall be appointed.

(6) As of the instant evaluation date of the instant company, the weighted average amount of the profit and loss on disposal of the profit and loss and tangible assets prior to the tax deduction from 2008 to 2010, which were three years prior to the date of the instant evaluation, is as follows:

A person shall be appointed.

E. Determination

(1) Whether the instant disposition is unlawful

According to the above facts, the weighted average amount of profit and loss from disposing of tangible assets during the preceding three years is below 86,802,817 won, which is about 41% of the weighted average amount of profit and loss before deducting corporate tax for the preceding three years, and it does not fall under Article 17(1)6 of the Enforcement Rule of the former Inheritance and Gift Tax Act.

However, in light of the following circumstances recognized by the above recognition facts, it is anticipated that the net profit and loss amount after the business year (201) to which the evaluation base date belongs, compared to the net profit and loss amount for the last three years (2008 to 2010) due to the temporary friendly situation that occurred prior to the evaluation base date of the instant case, will be significantly changed, and it is difficult to view that the past performance will continue thereafter, and the circumstances after the evaluation base date of the instant case were also consistent with the above presumption. It is unreasonable to calculate one stock value based on the weighted average amount of net profit and loss pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance and Gift Tax Act, because it is difficult to properly reflect the future profit and loss of the instant company.

① The instant company did not generate profits from the disposal of tangible assets from 2005 to 2008, which was before 2009, and even after 2009, no profits from the disposal of tangible assets were generated from 2010 to 2014. As such, it appears that a large amount of profits from the disposal of tangible assets was generated in 2009.

1 ② If the instant company sells construction equipment and trucks necessary for the collection, crushing, and recycling of construction waste in 2009, it is difficult to view that the previous performance will continue before installing new construction equipment and trucks.

Third, the profits and losses before the corporate tax deduction in 2009 are reflected in KRW 260,435,567, which is the profits and losses from the disposal of tangible assets in 2009, and KRW 500,519,572, but the profits and losses before the corporate tax deduction in 2010 have no particular profits and losses from the disposal of tangible assets, and there have been a significant decrease in the amount to KRW 25,143,574, KRW 24,247,486, KRW 11,227,212.

Therefore, even though the shares of this case do not fall under the reasons for preliminary reason under Article 17-3 (2) 6 of the former Enforcement Rule of the Inheritance and Gift Tax Act, it is reasonable to assess the net profit per share of the shares of this case under Article 56 (2) 2 of the former Enforcement Decree of the Inheritance and Gift Tax Act because it is deemed unreasonable to evaluate the shares of this case as it does not properly reflect the future profit power of this case for the last three years. Thus, the disposition of this case which calculated the appraised value per share of the shares of this case under Article 56 (1) 1 of the former Enforcement Decree of the Inheritance and Gift Tax Act is unlawful.

(2) Scope of revocation

Whether a disposition is lawful in a lawsuit seeking revocation of disposition is determined depending on whether it exceeds a reasonable tax amount. The parties concerned may submit objective tax bases and materials supporting the tax amount until the closing of argument in the fact-finding court. When calculating a legitimate tax amount to be imposed lawfully based on such materials, only the portion exceeding the reasonable tax amount shall be revoked, but in such case, the entire taxation disposition shall be revoked. In such a case, the court does not have a duty to calculate a legitimate tax amount to be imposed by actively finding a reasonable and reasonable and reasonable calculation method by its authority (see, e.g., Supreme Court Decisions 94Nu13527, Apr. 28, 1995; 2015Du622, Sept. 10, 2015).

In this case, since there is no person who calculates the presumption profit pursuant to Article 56 subparagraph 2 of the former Enforcement Decree of the Inheritance and Gift Tax Act, so it is impossible to calculate the legitimate amount of gift tax to be imposed on the plaintiffs, the entire disposition of this case shall be revoked within the scope

3. Conclusion

Since the plaintiffs' claims are well-grounded, all of them shall be accepted, and it is so decided as per Disposition.

(Presiding Judge)

Mashee

United Kingdom of America

Site of separate sheet

Relevant statutes

(1) The former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201)

Article 63 (Evaluation of Securities, etc.)

(1) Securities, etc. shall be appraised by any of the following methods:

1. Appraisal of stocks and investment shares:

(c) Stocks and equity shares other than those under item (b), which are not listed on the Korea Exchange, shall be appraised by the methods prescribed by Presidential Decree in consideration of the assets, profits, etc. of the corporation per

(1) Enforcement Decree of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23527, Jan. 25, 2012)

Article 54 (Appraisal of Unlisted Stocks)

(1) The weighted average value of the net asset value per share of the stocks and equity shares not listed on the Korea Exchange under Article 63 (1) 1 (c) of the Act (hereafter referred to as "non-listed stocks" in this Article and Article 56-2) and the net asset value per share, respectively, shall be the value appraised (hereinafter referred to as "net value of profit and loss") by the following formula. (c) In cases of a real estate and multi-owned corporation (referring to a corporation falling under Article 158 (1) 1 (a) of the Enforcement Decree of the Income Tax Act), the ratio of the net value of profit and loss per share and the net asset value per share shall be 2 and 3:

The value per share = The weighted average amount of net profits and losses per share for the latest three years: Three years guaranteed by a financial institution.

The interest rate determined and publicly notified by the Minister of Strategy and Finance in consideration of distribution rates of maturity bonds

"net value reduction rate of profit and loss"

(2) The net asset value per share under paragraph (1) shall be the value appraised by the following formula:

The value per share = The net asset value of the relevant corporation: Total number of outstanding stocks (hereinafter “net asset value”).

§ 56. Calculation method of net profit and loss per share for the latest three years

(1) The weighted average amount of net profits and losses for the preceding three years per week under Article 54 (1) shall be based on the value under subparagraph 1, but in cases prescribed by Ordinance of the Ministry of Strategy and Finance as being unreasonable to make the value under subparagraph 1, such as an abnormal increase in the amount of net profits and losses for the preceding three years of the relevant corporation due to a temporary contingency, the value under subparagraph 2 may be set. In such cases, if the value is not more than zero won, it shall be set at zero won:

1. The amount calculated by the following formula:

The weighted average amount of net profit and loss per share in the last three years =

[The net profit and loss per share of the business year one year before the evaluation base date x 3] + (2 years before the evaluation base date)

net profits and losses per share in the business year under this title x 2) + (one week in the business year before the base date of appraisal)

Current net profit and loss x 1/6) x

2. The average value of estimated interest per share calculated by an institution specializing in credit assessment prescribed by Ordinance of the Ministry of Strategy and Finance, an accounting corporation under the Certified Public Accountant Act, or a tax accounting corporation under the Tax-Free Judicial Act, or an accounting corporation in accordance with the standards prescribed by Ordinance of the Ministry of Strategy and Finance;

Article 17-3 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (Amended by Ordinance of the Ministry of Strategy and Finance No. 267, Feb. 28, 2012);

(1) "Cases prescribed by Ordinance of the Ministry of Strategy and Finance" in the former part of Article 56 (1) of the Decree means cases where it is unreasonable to evaluate the net profit and loss amount per share in the last three years due to any of the following causes:

6. Where the weighted average amount of gains or losses on disposal of securities type assets and gains on the receipt of assets, etc. under corporate accounting standards in the last three years exceeds 50 percent of the weighted average amount of gains or losses prior to the deduction of corporate tax in the last three years;