Cho High Court Decision 2010Da1212 ( December 17, 2010)

Gift tax is legitimate, even if the date of settlement of the gift profit after the death of the donor arrives.

In calculating profits from the listing, etc. of stocks or equity shares, the date for settlement is merely the base date at the time of calculating the donation profits, and it is not the donation on the date for settlement, but it is included in the taxable value of inherited property.

Article 13 of the Inheritance Tax and Gift Tax Act

Article 41-3 of the Inheritance Tax and Gift Tax Act

2011 Gohap1437 Revocation of imposition of gift tax

Park XX

O Head of tax office

June 30, 2011

August 11, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 316,860,830 of the gift tax on March 16, 2008 against the Plaintiff on January 8, 2010 is revoked.

1. Details of the disposition;

가. 원고는 2004. 9. 30. 조부(祖父)인 소외 박AA로부터 비상장법인인 주식회사 XX메탈(이하 'XX메탈'이라 한다)의 주식 28,800주를 증여(이하 '이 사건 증여'라 한다) 받았는데, 이후 XX메탈은 2006. 8. 21. 무상증자를 실시하여 원고는 이 사건 증여주식에 따른 무상주로 9,833주(이하 '이 사건 무상주식'라 하고, 위 무상주식과 위 증여주식을 합하여 '이 사건 비상장주식'이라 한다)를 취득하였다.

B. The GATT 200 on October 4, 2006 divided the face value of KRW 5,000 per share into face value of KRW 500,000, and thereafter, the said Park Dong was listed on the KOSDAQ market on December 17, 2007, and the said Park Dong died on August 12, 2007.

C. On January 8, 2010, the Defendant calculated the value of donated property as indicated below as of March 16, 2008, pursuant to Article 31-6 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, and imposed KRW 709,393,470, which was partially reduced the said gift tax by setting the value of donated property to the Plaintiff on April 5, 2010, by setting the value of donated property on the ground that the Plaintiff’s profits derived from the listing of the instant donated shares and the KOSDAQ market (hereinafter “listed profits of this case”) fall under the Inheritance Tax and Gift Tax Act under Article 41-3 of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”).

D. On March 31, 2010, the Plaintiff appealed, and filed a tax appeal on March 31, 2010, and the Tax Tribunal rendered a decision on December 17, 2010 by re-fixing the “profit arising from the substantial increase in corporate value per share” as stipulated in Article 31-6(4)2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act to determine the value of donated property. Accordingly, the Defendant finally imposed KRW 316,860,830 on the Plaintiff (hereinafter “instant disposition”).

E. Meanwhile, the total number of outstanding shares at the time of September 30, 2004, which was the donation date of this case, was 480,000,000. Of these, ParkM, the father of the Plaintiff, was 61.25%, 14%, 14%, 14%, and 4%, respectively, and those related parties owned 83.25% of the total number of outstanding shares of XX.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 4, Eul evidence 1 to 6, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Defendant deemed the time of donation of the instant disposition to be March 16, 2008 and rendered the said disposition. However, since ParkA, a donor, was already deceased at the said time, it cannot be deemed that there was a gift after the donor died, and thus, even though the requirements for gift tax assessment were not satisfied, the instant disposition that the Defendant imposed gift tax on the Plaintiff on the gift of March 16, 2008 is unlawful.

2) The instant unlisted shares constitute “property value donated by an ancestor to a person who is not an heir within five years prior to the commencement date of inheritance” under Article 13(1)2 of the Inheritance Tax and Gift Tax Act and should be included in the taxable amount of inheritance taxes, and should be excluded from the taxable amount of inheritance taxes, so the instant disposition

3)Article 31bis6 of the Enforcement Decree of the Inheritance Tax and Gift Tax, which provides for the method of calculating the value of donated property, provides that the amount calculated by deducting the aggregate of the taxable amount of gift taxes per share as of the date of donation from the assessed value per share as of the date of settlement of accounts and the profits gained at a cost due to the substantial increase in corporate values per share, shall be multiplied by "the number of shares acquired at a cost or at a cost". Thus, the shares of this case, other than the donated shares, should be excluded from the calculation of the value of donated property, and the gratuitous shares shall not be included in

Nevertheless, the defendant calculated the appraised value per share as of the date of settlement, including the above free shares, and thus, the disposition of this case is unlawful.

B. Relevant statutes

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

C. Determination

1) As to whether the instant disposition was unlawful as at the time of donation after the donor’s death

A) The facts that Ga, a donor, died on August 12, 2007, and the Defendant, pursuant to Article 41-3 of the Inheritance Tax and Gift Tax Act, deemed March 16, 2008, which was after the death of Ga, as the date of settlement of the instant non-original shares, and the Plaintiff issued the instant disposition as seen earlier.

B) The legislative intent of Article 41-3 of the Inheritance Tax and Gift Tax Act, which is the basis of the instant disposition, is to prevent the transfer of stocks in fact by listing the stocks on the securities market after the largest shareholder, etc. of an unlisted corporation once donated the unlisted stocks on the securities market. In such a case, “in the event that the donated unlisted stocks have accrued from listing within a certain time, such profits shall be deemed to have been donated, and thus, gift tax shall be imposed on the said profits.” In such a case, the settlement basis date under Article 41-3(2) of the Inheritance Tax and Gift Tax Act is not to be deemed to have been given on the settlement basis as at the time of calculating the gift profits. Therefore, whether the donee received or acquired stocks from the largest shareholder, etc. under Article 41-3(1) of the Inheritance Tax and Gift Tax Act at the time of the initial donation of the unlisted stocks, and whether the donee and the donor obtained or did not fall under any of the above provisions of Article 31-6(1) and (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act.

However, there is no dispute between the parties on the record as to whether the instant disposition satisfies all the taxation requirements under Article 41-3 of the Inheritance Tax and Gift Tax Act. Accordingly, the Plaintiff’s assertion to the effect that the instant disposition was unlawful as of March 16, 2008, by calculating the listing benefits of this case as of March 16, 2008, which was the date of settlement of accounts, and deeming that the Plaintiff was donated the benefits, and that the gift tax on the said benefits was imposed on the Plaintiff, and that the instant disposition was unlawful at the time of donation after the death of the donor.

2) As to whether the listed earnings of this case are included in the taxable amount of inheritance taxes

A) Article 13(1)2 of the Inheritance Tax and Gift Tax Act provides that “The value of the property donated by an ancestor to a person who is not an heir within five years prior to the commencement date of inheritance” shall be included in the taxable amount of inheritance taxes. The fact that the instant unlisted stocks are the property donated to the Plaintiff, not an heir, within five years prior to the commencement date of inheritance due to the death of ParkA, is as seen earlier

B) However, as seen earlier, the gift tax under Article 41-3 of the Inheritance Tax and Gift Tax Act is imposed on the listed profits arising from the listing after the donation of the shares, not the instant non-listed shares, and Article 13(3) of the Inheritance Tax and Gift Tax Act provides that "the value of the donated property excluded from summing-up under Article 47(1) shall not be included in the value of the donated property added to the taxable value of the inherited property pursuant to paragraph (1)." Article 47(1) of the Inheritance Tax and Gift Tax Act provides that the value of the donated property under Article 41-3 of the Inheritance Tax and Gift Tax Act is one of the donated property excluded from summing-up, and it is not the value of the donated property added to the taxable value of the inherited property.

In this regard, the Plaintiff asserts that Article 13(3) of the Inheritance Tax and Gift Tax Act does not apply to cases where a donor dies before the shares of the donor are listed. In such a case, the value of donated property under Article 41-3 of the Inheritance Tax and Gift Tax Act should be included in the value of inherited property. However, contrary to the language and text of Article 13(3) of the Inheritance Tax and Gift Tax Act, there is no ground to include the listed gains under Article 41-3 of the Inheritance Tax and Gift Tax Act in inherited property or donated property according to the donor’s death fraud. Furthermore, the inheritance tax is levied on inherited property as of the commencement date of inheritance, i.e., the inheritance tax is levied on inherited property at the time of the decedent’s death. As such, the Plaintiff’s assertion that the gift

Therefore, the plaintiff's assertion on the premise that the listed interest in this case is included in the taxable value of inherited property is not reasonable.

3) As to whether the instant gratuitous shares should be excluded from calculating the value of donated property

Article 41-6 (6) of the Inheritance Tax and Gift Tax Act explicitly provides that "the acquisition of stocks, etc. shall include new stocks acquired or allocated by the corporation to increase its capital." Since the provision provides that "the acquisition of stocks, etc. shall include new stocks issued by the corporation to increase its capital, and it shall not be deemed that new stocks are issued by the capital increase without compensation, and it shall include all of the new stocks, which are received by the stocks, donated after donation, regardless of their capital increase." In addition, since Article 31-6 (7) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the proviso to Article 56 (3) of the Inheritance Tax and Gift Tax Act, Article 17-3 (5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the economic value of the stocks, etc. received by the corporation to the effect that the stocks, etc. are issued without compensation between the date of donation or acquisition and the date of listing, it shall not be deemed that the provision of Article 41-6 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the value of the stocks donated stocks shall be calculated without compensation."

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.