Incheon District Court 2010Guhap5398 (Law No. 21, 2011)

National High Court Decision 2007J 4035 (Law No. 14, 2010)

If there is no market price of the title trust shares, an assessment by supplementary assessment method is made.

(1) In light of the fact that the title truster and the trustee are in a relationship of relatives and relatives, and there is no evidence to acknowledge that the stock price was actually paid at the time of capital increase with consideration, this value is formed through a general and normal transaction between many and unspecified persons, and it cannot be viewed as the market price reflected in the objective value of exchange.

2011Nu28167 Revocation of Disposition of Imposition of Gift Tax

Notes 1 et al.

Deputy Director of the Tax Office

Incheon District Court Decision 2010Guhap5398 Decided July 21, 2011

March 8, 2012

March 29, 2012

1. All appeals filed by the plaintiffs are dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the first instance shall be revoked. The defendant shall revoke the imposition of each gift tax of ○○○○ upon the plaintiffs on June 16, 2007.

1. Quotation of judgment of the first instance;

The reasoning of the judgment of this court is that the "value of loss and profit" in the fifth below of the judgment of the court of first instance is "net profit and loss value"; the ○○○○○ in the last reduction is respectively dismissed to ○○○, and the relevant Acts and subordinate statutes of the court of first instance are added to the "related Acts and subordinate statutes" in the attached Form of the judgment of the court of first instance. However, the reasoning of the judgment of the court of first instance is the same as that of the judgment of the court of first instance, except for adding new arguments by the plaintiffs and the determination thereof. Thus, it is cited

2. The plaintiffs' assertion and judgment

A. The plaintiffs' assertion

1) On August 27, 2003, the Plaintiffs paid gift tax on each of the 1,000 shares deemed to have been donated to the title trust. On February 3, 2004, the Plaintiffs additionally acquired 9,000 shares of each of the instant shares through capital increase with capital increase. Such capital increase with capital increase is not subject to gift tax unless it falls under Article 39 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7335 of Jan. 14, 2005; hereinafter the same). Since each of the instant shares does not fall under the above capital increase, it is sufficient to pay only the gift tax on each of the instant shares to 00 won, and it is unlawful to deem that the said shares were held in title trust and impose gift tax on the value of the said shares by deeming it as a gift.

2) The net asset value of the instant company was ○○○○○ at the time of August 27, 2003, and was reduced to ○○○○○○ upon February 3, 2004. Meanwhile, the Plaintiffs increased the number of shares held by the Plaintiffs through capital increase with capital increase on February 3, 2004, but the ratio of the number of shares held by the Plaintiffs is 10% each, and is the same before and after the capital increase. Accordingly, the actual net asset value of the shares held by the Plaintiffs after the capital increase. Nevertheless, imposing gift tax on each of the instant shares acquired by the Plaintiffs is unlawful as a disposition contrary to the principle of substantial taxation.

3) Even if gift tax should be imposed on each of the instant shares, such value shall be calculated by the method prescribed in Article 29(3)1(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18903, Jun. 30, 2005; hereinafter the same).

B. Determination

1) The facts that the plaintiffs acquired each of the shares of this case through capital increase with the capital increase on February 3, 2004 were nominal trust between the parties concerned (see the plaintiff's complaint and the legal brief on September 8, 2011; the plaintiffs' first assertion appears to have been revoked of the confession, but there is no evidence to prove that the confession was contrary to the truth and due to mistake). In addition, in full view of the overall purport of the pleadings in the statement in subparagraph 1-1 and 2-1 of the evidence No. 1-2, the plaintiffs may be recognized as having reported the gift tax on each of the shares of this case on the premise that the purchase price of each of the shares of this case was donated by the Sokina. As such, if the shares of this case were allocated under the names of the plaintiffs who are the title trustee at the time of the lutuna, and if the Sokina paid the purchase price, it is reasonable to deem that the shares of this case were trusted as well among the parties and the plaintiffs.

Furthermore, since each of the shares of this case, as shown in the reasoning of the judgment of the court of first instance cited earlier, is difficult to calculate the market price, its value can be calculated by the supplementary assessment method under Article 63 of the former Inheritance Tax and Gift Tax Act.

Therefore, the disposition of this case is legitimate when each of the shares of this case is deemed to have been nominal and deemed to have been donated and inheritance tax is imposed on that value. The plaintiffs' first argument is without merit.

2) Even if the net asset value of the instant company before and after the offering of new shares on February 3, 2004, was reduced remarkably, the Plaintiffs cannot be deemed to have no economic benefits derived from the Plaintiffs’ acquisition of the shares through the paid-in capital increase. Thus, the Plaintiffs are obligated to pay gift tax corresponding to the value of each of the instant shares newly acquired (as the Plaintiff’s assertion is based on the Plaintiff’s assertion, since the net asset value of the instant company after the offering of new shares was divided into 100,000 shares of the instant company after the offering of new shares, the net asset value per share after the offering of new shares was divided into 10,000 shares of the instant company. The net asset value per share of the instant company after the offering of new shares was divided into 0,000 shares, which is above the value per share of each of the instant shares calculated by the Defendant’s supplementary assessment methods. In light of this, the Plaintiffs are obligated to pay gift tax for the value of each of the instant shares duly assessed, regardless of whether the net asset value of the instant company itself changes.

3) As stated in the reasoning of the judgment of the first instance cited earlier, it is justifiable for the Defendant to assess the value of each of the instant shares by means of a supplementary assessment method under Article 63 of the former Inheritance Tax and Gift Tax Act. Article 29(3)1(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that where a corporation issues shares at a price lower than the market price, a certain shareholder shall regard the transfer of profits between the related parties by waiver of the exercise of preemptive rights and thereby, as a gift, and thus, it cannot be deemed that the provision for assessing the value of each of the instant shares under title trust as in this case is a provision for assessing the

3. Conclusion

All appeals by the plaintiffs are dismissed for lack of reason.