Seocho 2010west 1710 ( December 09, 2010)

When determining gift tax on title trust property, it is illegal because the evaluation base date and the evaluation method are wrong.

Although a change of entry was made in the register of shareholders, it cannot be readily concluded that “market price” is no data on the assessment of the donated property on the basis of the date of acquisition of shares, and that “the value that is normally recognized as a case of free transaction between many and unspecified persons, not the temporary and disposable transaction price.”

2011Guhap1423 Revocation of Disposition of Imposition of Gift Tax

X 3 others

Busan Tax Office et al. and three others

September 21, 2011

October 19, 2011

1. On September 1, 2009, the disposition of imposition of gift tax of KRW 788,049,820, the gift tax of KRW 788,049,820, and the imposition of KRW 300,60,300, the gift tax of KRW 1,916,939,940, and the imposition of KRW 1,90,935,460, which was made by the director of the regional tax office with respect to Plaintiff Cho Yong-CC on December 1, 2009 by the director of the regional tax office, of KRW 1,916,939,940, and the imposition of KRW 1,908,835,460, which was made against Plaintiff Jeoncheon on December 1, 2009.

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

The same shall apply to the order.

1. Details of the disposition;

A. As a result, the director of the Central Regional Tax Office conducted a survey on the process of acquiring shares of Plaintiff ChoA, DaB, KimCC, and JeonD from May 14, 2009 to June 24, 2009, the director of the Central District Tax Office of China (hereinafter referred to as the “P technology”) and the Plaintiff Co., Ltd. (Gu Y Holdings; hereinafter referred to as the “OO”) and the Plaintiff Co., Ltd. (Gu Y Holdings; hereinafter referred to as the “O”) from May 10, 2007 to February 8, 2007, the Plaintiffs acquired 50,916 shares from the E, etc., and notified each of the above Defendants of the taxation data by viewing that each of the above Defendants acquired O60,00 shares from △△△△, Inc. (Gu △△&D; hereinafter referred to as the “△△△”) and notified each of the aforementioned shares to the Defendants.

B. Accordingly, under Article 45-2 of the Inheritance Tax and Gift Tax Act, the Defendants deemed the Plaintiffs to have donated each of the above shares from the largestF. On September 1, 2009, the director of the Busan District Tax Office, on December 1, 2009, imposed each gift tax on the Plaintiff Choyang Tax Office, the director of the Goyang Tax Office, the director of the Gangwon District Tax Office, and the director of the Yangcheon Tax Office, on the Plaintiff Choyang Tax Office, the director of the Seoyang Tax Office, and the director of the Yangcheon Tax Office, on December 1, 2009, on which each of the following gift tax amount was stated in the aggregate

C. On March 3, 2010, the Plaintiffs were dissatisfied with each of the instant dispositions and filed an appeal with the Tax Tribunal on March 3, 2010, but the Tax Tribunal rendered a decision to dismiss all of the Plaintiffs’ appeals on December 9, 2010.

[Ground of recognition] Evidence A 1, Evidence B 1 to 6 (including each number), the purport of the whole pleading

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

A. The plaintiffs' assertion

(1) The Plaintiffs purchased the shares of XX technology for the purpose of investment in mind with the high value of XX technology, and thereafter, paid KRW 2,535,502,20 in total of the purchase price of the said shares as KRW 5,489,373,120 in total after selling and receiving the shares of the said XX technology to △△△△△, etc., and thus, the Plaintiffs merely raised the acquisition fund and did not receive title trust for the shares of XX technology from the largestF.

(2) Although the Plaintiffs were offered to sell the shares held by the Plaintiffs from △△△△△, and there was a concern for a decline in the value of the shares held by the Plaintiffs in the future, they were willing to purchase the shares of the O in the event they sold the shares held by △△△△△, but they were willing to buy the shares of the O in the future. The Plaintiffs were to pay KRW 6,614,850,000 in the aggregate of the purchase price of the shares borrowed from △△△△ Incorporated Co., Ltd. (hereinafter referred to as “△△△△”), KRW 6,615,00,000 in total, and KRW 5,115,00,00 in the loans borrowed from 2,953,870,920 in the aggregate of the sales profits of the shares held by the P technology, and KRW 5,489,373,120 - KRW 2,535,502,200 in the aggregate of the loans borrowed from 26,81,20036,401,2000.

(3) Even if the Plaintiffs received each title trust with the highest FF’s maximum technology andO shares, the calculation of the value of donated property should be based on the transfer date. The Defendants calculated the value of donated property on the basis of the acquisition date of each of the above shares, without confirming the transfer date. As such, the calculation method of the value of donated property is unlawful.

(4) Therefore, each of the instant dispositions should be revoked as it is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On February 19, 2006, the MF and the MF newly established the company P (hereinafter referred to as the “P”) by dividing the road traffic sector among the business sector of the former XX technology into human resources. The MF and the MF, after adjusting their shares in order to independently manage and independently operate XX technology, the MF would operate the MF and the MF would operate the MF. The MF sold the MF’s shares to 2.4 billion won on the part of the MF. As seen earlier, the MF sold the MF’s shares to 2.4 billion won on the part of the MF and the MF’s shares to 2.5 billion won on January 10, 2007 through February 8, 2007. The MF sold the MF’s shares to 50,500,500,500,5250,500,505,000 won among their shares to the Plaintiffs.

(2) The Plaintiffs completed a transfer of entry into the register of shareholders of XX technology with respect to the shares purchased from Yang E, etc. on February 23, 2007. However, as seen below on August 28, 2007, the Plaintiffs paid KRW 2,535,502,200 of the above purchase price to Yang E, etc. on August 29, 2007, after again selling the shares of XX technology to △△△, etc. and receiving the sales payment (the date when the Plaintiff entered into a contract with the △△△△, etc.).

(3) On the other hand, from December 31, 2006, the MF, the representative director of XX technology, owned 802,550 shares of XX technology (referred to as 35.39 percent shares of XX technology) from December 31, 2006 to the date of free capital increase. After free capital increase on August 7, 2007, the MF owned 1,171,723 shares (referred to as 35.39 percent shares of XX technology).

(4) Article XX technology was increased free of charge on August 7, 2007. As a result, Plaintiff Cho Jae-B came to hold 132,440 shares of XX technology, Plaintiff KimCC, 264,880 shares, and Plaintiff Jeon Dong-D, respectively. The Plaintiffs paid securities transaction tax on October 10, 2007 when transferring the shares owned by them as indicated in the following table, and paid capital gains tax in installments on November 30, 2007 and on January 15, 2008 (2) over two occasions.

(5) On August 28, 2007, the Plaintiffs entered into a contract with △△△ to purchase 6,615,000,000 won in total, including the management right from △△△△△△. The Plaintiffs used 6,614,850,000 won in total borrowed from △△△△△△ as indicated in the following table, and paid KRW 5,115,00,000 in total on August 28, 2007, and paid KRW 1,50,000 in total on October 12, 207, and completed entry in the register of shareholders of O with respect to the O shares purchased from △△△△△△△△△ on December 31, 207.

(6) Meanwhile, the Plaintiffs borrowed 5,115,00,000 won in total from the above △△△△△△ on August 28, 2007, in total of KRW 2,953,870,920, which was part of KRW 2,683,526,00 in total of sales profits from the shares of XX technology, and KRW 2,431,474,00 in total of the remainder of the borrowed amount, and repaid all of the borrowed amount on August 30, 207, with the largest amount of KRW 2,431,474,00 in total.

(7) The XX technology decided to take over a stock company (GuCC Co., Ltd.; hereinafter referred to as "GuCC") which is listed on KOSDAQ around January 2007, and on July 30, 2007, △△ entered into a contract with △△ to take over the stock and management rights, and became a controlling shareholder of △△, starting to purchase the stock and becoming a controlling shareholder of △△. Thereafter, on August 28, 2007, △ technology was absorbed into △△ as of November 17, 2007 following a resolution of the board of directors, and the largest FF became a controlling shareholder of △△△.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, Eul evidence Nos. 1 to 14 (including each number), the purport of the whole pleadings

D. Determination

(1) Whether or not they title trust shares of XX technology

Considering the above facts and the following circumstances admitted by the evidence as seen earlier, it is reasonable to view that the largest FF acquired the shares of XX technology under the name of the plaintiffs, and that the largest FF trusted the above shares to the plaintiffs. Therefore, this part of the plaintiffs' assertion is without merit.

① During the process of human division of the Gu XX technology and the XX technology, the MF has to acquire the MF technology shares owned by both E and others. The MF has already held 802,550 shares of XX technology (35.39%). In addition, when 50,916 shares are acquired, 1,303,466 shares (57.48%) are owned by 1,303,466 shares (57.48%) and becomes an oligopolistic shareholder, it was necessary to avoid the tax to be borne (the second taxpayer under the Framework Act on National Taxes and the payment of acquisition tax due to deemed acquisition by oligopolistic shareholder under the Local Tax Act).

② A total of KRW 27,446,810 of the securities transaction tax imposed upon the Plaintiffs with respect to the transfer of XX technology stocks was withdrawn and paid from the legal entity account of GATT 595-17 -0000, and the total of KRW 133.693.720 on November 30, 2007, the capital gains tax was withdrawn from the Hah’s account (agricultural Cooperatives 595-02-0000)’s capital from Hah’s employee’s account. The total of KRW 133,691,730 on January 15, 2008, the capital gains tax was paid with the funds that were withdrawn from the legal entity account of XX technology (bank 444-91004-000).

③ On February 23, 2007, prior to the payment of purchase price for shares of XX technology to bothE, the Plaintiffs became a change in the register of shareholders of the register of shareholders, and the Plaintiffs paid the said purchase price on August 29, 2007 as the sale price received when selling the shares of XX technology from January 10, 2007 to February 8, 2007, which was concluded with the share acquisition agreement (the Plaintiffs do not specify the payment date when concluding the share acquisition agreement with the E, etc.).

④ The Plaintiffs, who entered into a contract with △△△, etc. for selling XX technology stocks, received the sales price from △△△, etc. on August 28, 2007, prior to September 1, 2007. If the Plaintiffs own XX technology stocks, there is no reason to pay the purchase price prior to the date of the contract.

⑤ The Plaintiff ChoA and JeonD stated that they were not aware of the number of acquired XX technology shares, their purchase price, the fact of sale and the circumstances leading to their sale.

6) In the process of purchasing XX technology stocks, the Plaintiffs cannot confirm funds raised by themselves, without going through the leastF.

(2) Whether a title trust of O shares is held

Considering the above facts and the following circumstances acknowledged by the evidence as above, it is reasonable to view that the largest FF acquired O shares using the plaintiffs' name and thereby the largest FF trusted the above shares to the plaintiffs. Therefore, this part of the plaintiffs' assertion is without merit.

① The largest FF attempted to take over the shares of 2,007,000 shares (13.64%) held by △△△△△, upon the demand of the △△△ who consulted on the above underwriting, purchased shares of 7,500,159,000 shares of 1,00,000 shares (6.57 percent shares of △△△), and △△△△, which was held by △△△△△, for shares of 1,564,548 shares of △△△△△ (10.63 percent shares of △△△△△), for shares of 3,100,000,00 shares (6,615,000 shares of △△△△△△△△), and transferred shares of 60,000 shares (10.63 percent shares of △△△△△△△△△△△) from △△△ whose shares were held by △△△△△△.

② As above, the maximum amount of the FF had to acquire 60,000 shares of OO from △△△△ (100% of shares). It was necessary for the FF to avoid taxes to be borne by the oligopolistic shareholder if it acquired 60,000 shares of OO (payment of acquisition tax due to deemed acquisition by an oligopolistic shareholder under the Framework Act on National Taxes and the Local Tax Act). When it acquired O shares in the name of the largest FF, O may become a special-related corporation with △△, etc., and O may be a special-related corporation, and thus, it is necessary to avoid such tax burden.

③ In order to pay the purchase price of listed stocks, the Plaintiffs borrowed 6,614,850,000 won in total from △△△△△, a corporation in special relationship with the largestF (i.e., KRW 5,115,00,000 + KRW 1,49,850,000) and paid the down payment and balance of listed stocks. Of that, the Plaintiffs borrowed 5,115,00,000 won in total from 2,683,526,000 won in total and 2,431,474,000 won in total from the largest amount of gains accrued from selling XX technology stocks and from the largest amount of KRW 2,431,474,00 in total, and paid with the purchase price of listed stocks, it cannot be confirmed by the Plaintiffs themselves without going through the lowest amount.

④ On August 28, 2007, the down payment that the Plaintiffs paid to purchase price of the listed shares was transferred from the account of △△△ to △△ directly instead of going through the Plaintiffs’ account. On August 31, 2007, KRW 2,431,474,000 was also transferred to △△△△△ without going through the Plaintiffs’ account.

⑤ In borrowing KRW 2,431,474,00 in aggregate from the largestF, the Plaintiffs offered the listed stocks as security. If the Plaintiffs fail to repay it, the said listed stocks are likely to be attributed to the largestF.

⑤ The Plaintiff ChoA and JeonD stated that they did not know about the process of acquisition of O shares, the number of acquired O shares, the purchase price thereof, etc.

(3) Whether calculating the value of donated property is lawful

(A) Standard of appraisal of donated property

Article 45-2 (1) of the former Gift Tax Act provides that, where the actual owner or the nominal owner of the property, which requires a transfer of rights or a registration thereof, is different, the value of the property shall be calculated on the basis of the date when the property is registered, etc. as the nominal owner (where the property is subject to a transfer of title, the date when the actual transfer of title is made), notwithstanding the provisions of Article 14 of the Framework Act on National Taxes, but where the property is subject to a transfer of title, if the transfer of title is not made, it

The Defendants, as seen earlier, are in violation of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act because they evaluate donated property on the basis of the date of acquiring the shares of XX technology andO, despite the fact that the register of shareholders of the O on December 31, 2007 entered into the register of shareholders of the O on December 31, 2007.

(B) Calculation method of donated property

Article 60 (1) of the former Gift Tax Act provides that the value of the property shall be the market value as of the date of donation. The "market price" refers to the value that is generally established when free transactions take place between many and unspecified persons, i.e., an objective exchange value formed through normal transactions. Thus, even if there is a transaction example, where the transaction value cannot be deemed as a price formed through normal transactions that appropriately reflects the objective exchange value of the property, or where the transaction value is non-listed stocks subject to donation, it shall be deemed difficult to calculate the market price, and its value may be calculated in accordance with the supplementary assessment method provided for in Article 63 (1) 1 (c) of the former Gift Tax Act (see, e.g., Supreme Court Decisions 2003Du5723, Oct. 15, 2004; 2000Du13945, Jun. 11, 1991; 200Du13945, Feb. 139, 2005).

In the process of human division of the PP technology of this case, the maximum F and E acquired 500,500,502,200 won in aggregate of the plaintiffs' 500,000,000 shares of the PP technology held by both E. Meanwhile, the E acquired about 2.40,000,000 won in the MP shares held by the largest F., as seen above, the fact that △△△ transferred all of the O shares including the management rights to the plaintiffs, i.e., the acquisition of the PP shares, i., the most F and E acquired the shares under the name of the plaintiffs, i.e., the 00,000,000,0000,000 won, including the 60,000,000,000,000,000 won, and the 60,000,000,000,00 won,00,00,00 won.

(C) Therefore, each of the instant dispositions is unlawful due to an error in the standard and method of appraisal of the value of donated property (in particular, in the case of Plaintiff IslandB, even though the acquisition value of the shares XX 166,590,200 won, Defendant Goyang Tax Office calculated the value of donated property due to the donation of the shares XX 235,851,200 won).

(4) Scope of revocation

The legality of a disposition is determined depending on whether the amount of taxation exceeds the reasonable amount of tax. The parties concerned may submit arguments and materials supporting the objective amount of tax liability until the closing of argument in the fact-finding court. When computing the legitimate amount of tax to be lawfully imposed based on such materials, the court must only cancel the portion exceeding the reasonable amount of tax (see, e.g., Supreme Court Decision 97Nu19496, Sept. 29, 2000). However, the burden of proof on the materials that serve as the basis for calculating the tax base lies on the tax authority. Thus, if the tax authority fails to prove the legitimate amount of tax, the tax authority should once revoke the entire amount of tax, and then have the tax authority calculate the legitimate

Inasmuch as the objective market price or appraisal price of shares of XX technology andO as of the date of entry of change of holders during the pleading of the instant case is not submitted at all, the entire imposition disposition of the instant case shall be revoked.

3. Conclusion

Therefore, the plaintiffs' claims of this case are with merit, and it is so decided as per Disposition by admitting them.