Evaluation according to supplementary evaluation methods is legitimate because there is no example of transaction that reflects objective exchange values.

The acquisition price of shares at the time of capital increase is difficult to be considered as the market price reflecting the objective exchange value formed by the general and normal transaction, and there is no other evidence to prove the market price, so it is legitimate to calculate the price of the shares in this

The revocation of revocation of imposition of gift tax by Suwon District Court 2014Guhap50218

O KimO

O Head of tax office

April 7, 2015

May 12, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of gift tax on January 7, 2013 by OOO, OOO, and OOO on the Plaintiff is revoked.

1. Details of the disposition;

A. On January 5, 2007, the Plaintiff acquired 00 shares of the listed company (hereinafter referred to as the “instant company”) from the KimA on January 5, 2007, 00 shares from the previous A on the 20th of the same month, 00 shares from the ChoA on the 31st of the same month, and 00 shares in total from the ChoA on the 31st of the same month, and 000 shares in face value per share (hereinafter referred to as “the shares acquired by the Plaintiff”).

B. On October 22, 2012, the Defendant: (a) assessed the market price per share of the instant shares as 100 won per share; (b) assessed the difference between KRW 100 per share of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “former Inheritance Tax and Gift Tax Act”); and (c) Article 54(1), (2), (5), and Article 56(1)1, (2), and (3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1989, Feb. 28, 2007; hereinafter the same shall apply); and (c) assessed the difference between KRW 100 per share of the instant shares and KRW 200 per share of the value of the gift tax on KRW 300,000,000,000 for the value of the gift tax on KRW 1,300,00,00.

C. On April 3, 2013, the Plaintiff filed an appeal seeking the revocation of the instant taxation disposition with the Tax Tribunal, but the Tax Tribunal rendered a decision to dismiss the appeal on October 16, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 and 3 (including paper numbers), the purport of the whole pleadings

2. Whether the instant taxation disposition is legitimate

A. The plaintiff's assertion

The Plaintiff’s determination of the acquisition value of the instant shares as KRW 00,00, which is the face value of the instant shares, is without a special relationship, and freely decided by pursuing their respective economic interests among the parties to the instant transaction. From June 15, 2006 to September 30, 2008, the Plaintiff conducted capital increase with the acquisition value of KRW 000 per share over four occasions, and thus, the Plaintiff is the market value of the instant shares as an objective exchange value formed through normal transactions, and even if the acquisition value of the instant shares is lower than the market value, it shall not be deemed as a significantly lower price than the market value.

In addition, even if it is inevitable to calculate the market price of the instant shares based on the complementary valuation method, the instant company’s financial condition has deteriorated to the extent that new loans are impossible from the time when the Plaintiff acquired the instant shares until October 2008, which was not over two years since the time when the Plaintiff acquired the instant shares, and eventually closed on June 8, 2010, there is justifiable reason in terms of transaction practices, as the acquisition price of the instant shares was remarkably lower than the market price.

Therefore, the instant taxation disposition should be revoked.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) On June 19, 2003, the instant company was an unlisted corporation established for the purpose of manufacturing metal tanks, etc. in the building of AAA Co., Ltd. (hereinafter “AA”) located in OO-type O-type O-type 584-6 (hereinafter “OA”), but closed its business on June 8, 2010.

2) The initial representative director of the company of this case was 00 shares AA, and the total number of shares issued was 00 shares (amount of 000 shares), 00 shares, 00 shares, 00 shares, 00 shares, 00 shares, 00 shares of 00 shares, 00 shares of 00 shares, 00 shares of 00 shares, 00 shares of 00 shares, 10 shares of 0 shares of 00 shares, 200 shares of 0 shares, 10 shares of 10 shares, 30 shares of 0 shares, 10 shares of 0 shares, 20 shares of 0 shares, 10 shares of 0 shares, 20 shares, 3 shares, 00 shares of 0 shares, 00 shares, 00 shares, 00 shares, 00 shares, 00 shares, respectively, were transferred to 00 shares, 200 shares, 00 shares, 00 shares.

3) The financial status of the instant company after its incorporation is as follows.

(unit: million won)

[Ground of recognition] Facts without dispute, Gap evidence Nos. 5, 6, 12, Eul evidence Nos. 4, 7 through 13, the purport of the whole pleadings

D. Determination

1) Article 35(2) of the former Inheritance Tax and Gift Tax Act provides that “Where a property is acquired or transferred by transfer between persons other than those in a special relationship, the amount equivalent to the profits as determined by the Presidential Decree shall be presumed to have been donated the difference between the price and the market value only when the property is acquired by transfer or transferred by transfer without any justifiable reason, according to the transactional practice, and the amount equivalent to the difference between the price and the market value shall

In addition, Article 60 (1) and (3) of the same Act provides that the value of donated property shall be calculated based on the market price as of the date of donation and in cases where it is difficult to calculate the market price, the value of the donated property shall be calculated based on the methods prescribed in Articles 61 through 65 in consideration of the type, size, transaction situation, etc. of the relevant property, and Paragraph (2) of the same Article provides that "the market price under paragraph (1) shall be the value which is generally recognized as normal in cases of free transactions between many and unspecified persons, and shall include the amount which is recognized as the market price under the conditions as prescribed by the Presidential Decree, such as expropriation, public sale price, appraisal price, etc.", and the main sentence of Article 49 (1) 1 of the Enforcement Decree of the former Inheritance Tax and Gift Tax Act by delegation, if there is a transaction fact with respect to the relevant property, the proviso shall be excluded if it is objectively unreasonable

Therefore, even in a case of unlisted stocks with low market value, where there is a transactional fact, the price of the stocks shall be deemed the market price and the price of the stocks shall not be evaluated by the supplementary evaluation method stipulated in the Act. However, since the market price means the objective exchange price formed by the general and normal transaction, in order to recognize such transactional example as the market price, the circumstances that can be seen as properly reflecting the objective exchange value as of the date of donation should be acknowledged (see, e.g., Supreme Court Decision 2010Du26988, Apr. 26, 2012).

The following circumstances acknowledged by the evidence and the facts as above, namely, KimA, Jeon Soo, and Cho Soo, are: (a) there is no reason to adequately reflect the objective exchange value that can be formed between many and unspecified persons in determining the transfer value of the instant shares at the time of transfer; (b) there is no objective accounting data provided to reliable accounting corporations, etc. to assess the appropriate value of the instant shares or determine legitimate transfer value through substantial price negotiations; and (c) there is no other effort to supplement the value of the instant shares under the Inheritance Tax and Gift Tax Act by the Plaintiff’s shareholder and Ga’s representative director’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s Ga’s 1’s 00 shares and 4 times’ shares were transferred; and (d) there was no increase in the market value of the instant shares before and after the Plaintiff’s 1000 years.

2) Furthermore, in light of the various circumstances as seen earlier, such as the fact that KimA, Jeon-A, and ChoA are able to negotiate with a view to favorable terms and conditions of transaction at the time of the transfer of the instant shares, or that the instant shares were transferred to the Plaintiff by the representative director Park Sang-O as face value without making such efforts, it is reasonable to deem that if the pertinent shares were to be in a reasonable economy, they would have not been traded under such terms and conditions of transaction in the situation at the time of the transfer of the instant shares, and therefore, it is difficult to view that the acquisition value of the instant shares was determined as face value as constituting “justifiable cause for the transaction practice” under Article 35(2) of the former Inheritance Tax and Gift Tax Act.

3) Therefore, we cannot accept all the Plaintiff’s above assertion.

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.