Examination-Gift-2016-0045 ( October 16, 2017)

Whether the acquisition of property at a low price has been made at a significantly low price without justifiable reasons in light of transaction practices

The purchase of the shares of this case by the plaintiff constitutes a case where the plaintiff takes over the shares of this case at a price significantly lower than the market price without justifiable reasons in light of transaction practices.

Inheritance Tax and Gift Tax Act Article 35(1) of the Inheritance Tax and Gift Tax Act: Donations of profits from transfer at low price

Incheon District Court 2017Guhap446 Revocation of Disposition of Imposing Gift Tax

Park ○

○○ Head of tax office

October 18, 2018

November 08, 2018

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The imposition of gift tax (including additional tax) imposed on the Plaintiff on August 17, 2016 by the Defendant shall be revoked.

1. Details of the disposition;

On March 13, 2015, the Plaintiff purchased 8,000 shares of O○○ Co., Ltd. (hereinafter referred to as “O○○”) (hereinafter referred to as “instant shares”) (hereinafter referred to as “instant shares”) from O○○, a non-specially related person, at KRW 80,000 (10,000 per share) for the price of KRW 10,000. At the time of December 31, 2014, O○’s shares became the largest shareholder by purchasing the instant shares from O○○○, but the Plaintiff owned 4,00 shares (hereinafter referred to as “O○○”), 5,00 shares, and 5,00 shares (hereinafter referred to as “instant shares”).

Considering that it is difficult to calculate the market price of the instant shares, the Defendant assessed the value per share of the instant shares as KRW 91,643 by applying the supplementary evaluation method under Articles 60(3) and 63(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”); and without good cause, deemed that the Plaintiff’s acquisition of the instant shares at a price substantially lower than the market price under Article 35(2) of the former Inheritance Tax and Gift Tax Act (hereinafter referred to as “former Inheritance Tax and Gift Tax and Gift Tax Act”) and included the amount of KRW 353,14,00 (73,14,00; 80,000; 3,000,000,000) as additional tax for additional tax for the year 20,017).

[Ground of recognition] Evidence No. 10, Evidence Nos. 10, No. 1 and 2, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) Although ○○○ had economic difficulties and must sell the instant shares without any justifiable reason, considering the fact that the instant shares were non-listed shares and thus no transaction was made, and the Plaintiff purchased the instant shares at the request of ○○○○○, taking into account the fact that the Plaintiff purchased the instant shares at KRW 10,000 per share, it cannot be deemed that the Plaintiff purchased the instant shares from ○○○ at a price significantly lower than the market price or that there was no justifiable reason under the transactional practice. Thus, it cannot be deemed that the Plaintiff purchased the instant shares at KRW 10,00 per share from ○○ upon the request of

The instant disposition, which was taken differently, is unlawful.

2) Even if the value of the instant shares is assessed based on the supplementary assessment method in light of the case where it is difficult to calculate the market price of the instant shares, 600,000,000 won of the subscription deposit, which is included in the capital adjustment account on the statement of financial position for the business year 2014, should be excluded from the net asset value as it falls under the liabilities in its nature. Thus, the instant disposition otherwise deemed unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) As to the assertion that it does not constitute a low-price acquisition or exists with legitimate grounds

In order for the taxation of gift tax under Article 35(2) of the former Inheritance Tax and Gift Tax Act to be lawful, the tax authority must prove not only that the transferee acquired the property at a price significantly lower than the market price from a person other than the person having a special relationship, but also that there is no justifiable ground for transaction practice (see, e.g., Supreme Court Decision 2011Du22075, Dec. 22, 2011). However, if the tax authority is a reasonable economy, it can be proven that there is no justifiable ground for the transaction practice by submitting the objective circumstance, etc. that the taxpayer would not have made any transaction under such conditions as at the time of the transaction. If it is proved to a considerable extent, it is necessary to prove that there is a special circumstance that the taxpayer can easily submit specific data on the transaction circumstance, the reason for determining the transaction conditions, etc. in light of the difficulty of proof to reverse the said provision or the concept of fairness (see, e.g., Supreme Court Decision 2013Du2495, Feb. 12, 2015)

(3) The Plaintiff purchased the shares of this case, which are non-listed shares, from ○○○○○○○○○○○○○○○○○ in its entirety purport of the pleadings, in comparison with 91,463 won per share of the instant shares calculated by applying supplementary appraisal method (this is the amount considerably low compared with 73,83 won per share calculated by dividing the net asset value as of December 31, 2014 by the number of issued shares (2,216,493,927/300) by 00 won per share of the instant shares, even if it is difficult to obtain ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○’s sales value of the instant shares, without any reasonable consideration of the market value of the instant shares, and thus, it appears that the Plaintiff’s efforts to purchase or sell the instant shares, which is an amount of 10,000 won per share of the instant shares.

2) As to the assertion that new subscription deposits should be excluded from net asset value

Comprehensively taking account of the evidence No. 19 and the purport of the entire argument No. 19, the Defendant may acknowledge the fact that the Defendant included 600,000,000 won of the subscription deposit on the statement of financial position in 2014, by applying a supplementary evaluation method under Articles 60(3) and 63(1)1(c) of the former Inheritance Tax and Gift Tax Act and Article 54(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 26960, Feb. 5, 2016).

However, the subscription deposit money for new shares is paid to investors participating in the offering of new shares as the down payment. Upon the expiration of the subscription date, it is indicated in the amount to be appropriated for the amount paid for new shares as the amount of capital in the account, and is replaced by the capital and capital surplus when new shares are issued. As such, it has the nature of capital, not the liabilities, and it is likely that it may be included in the net asset value in assessing the value per share of the shares of this case by applying the above complementary appraisal method (OO substituted the above subscription deposit amount of KRW 600,000,000 among the above subscription deposit money of 60,000,000 with the offering of new shares in the business year of 206).

3) Whether the instant disposition is lawful

The disposition of this case is legitimate in view of the fact that it is difficult to calculate the market price of the stocks of this case and the value of the stocks of this case evaluated as the supplementary evaluation method is the market price, and the Plaintiff’s purchase of stocks of this case constitutes the acquisition of stocks at a price considerably lower than the market price without any justifiable reason.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.