[1] Whether Article 54(1) and (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act concerning the evaluation of unlisted stocks is an invalid provision that deviates from the delegation scope under Article 63(1)1(c) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (negative)

[2] In assessing net profit and loss value of unlisted stocks, whether the amount of net profit and loss reserve for the previous business year should be included in deductible expenses when calculating income for each business year under Article 56(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (negative)

[1] Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002); Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 2002) / [2] Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002); Articles 54 and 56 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 202)

Plaintiff 1 and two others (Attorney Kang In-bok, Counsel for the plaintiff-appellant)

Head of Sungnam Tax Office

Seoul High Court Decision 2005Nu13737 delivered on November 2, 2005

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

According to Article 63(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter “former Inheritance Tax and Gift Tax Act”), the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828, Dec. 30, 2002; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) provides that the valuation of unlisted stocks shall be based on the net value (the rate determined by the Ordinance of the Ministry of Finance and Economy, taking into account the weighted average amount of net profit and loss for the last three years per week ± average interest rate formed in financial markets). Article 63(1)1(c) of the former Enforcement Decree provides that the net value of profit and loss shall be evaluated by the method prescribed by the Presidential Decree, taking into account the assets and earnings of the relevant corporation. Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828, Dec. 30, 196) provides that the above valuation of net asset value shall be considered.

Therefore, the judgment below to the same purport is just, and there is no error in the misapprehension of legal principles as to Article 63 (1) 1 (c) of the former Inheritance and Gift Act and Article 54 (1) and (2) of the former Enforcement Decree of the Inheritance and Gift Act, as otherwise alleged in the ground of appeal.

2. Regarding ground of appeal No. 2

In assessing the net profit and loss value of unlisted stocks, Articles 54(1), 56(1), and 56(3) of the former Enforcement Decree of the Inheritance and Gift Tax Act provide that the net profit and loss amount for the last three years shall be calculated by subtracting the amount under Article 56(3)1 of the former Enforcement Decree of the Inheritance and Gift Tax Act from the amount calculated by adding the amount under Article 56(3)1 of the former Enforcement Decree of the Inheritance and Gift Tax Act to the income for each business year under Article 14 of the same Act. In light of the fact that the legislative purport of each of the above provisions is to accurately grasp the stock value as of the date of evaluation based on the weighted average amount of net profit and loss calculated by the company for the last three years prior to the date of evaluation, in order to calculate the income for each business year under Article 56(3) of the former Enforcement Decree of the Inheritance and Gift Tax Act, it shall not be included in deductible

In the same purport, the court below is just in holding that the defendant did not include 159,631,469 won in the calculation of income for the business year 1998 of the KOSASASSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS 195 through 197 in the calculation of losses

3. Conclusion

Therefore, all appeals are 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 Kim Young-ran (Presiding Justice)