Plaintiff 1 and three others (Law Firm Dawon, Attorney Park Jong-soo, Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

January 27, 2012

1. The plaintiffs' claims are dismissed.

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

The imposition of inheritance tax by the Defendant against the Plaintiffs on July 13, 2010, respectively, shall be revoked.

1. Details of the disposition;

A. On April 22, 2009, the Plaintiffs succeeded to the property upon the death of the deceased Nonparty (hereinafter “the inheritee”) and paid KRW 181,771,890 to the Defendant on October 28, 2009 by filing an inheritance tax report with the Defendant on KRW 3,65,188,452.

B. From April 1, 2010 to May 31, 2010, the Defendant conducted an inheritance tax investigation on the Plaintiffs. On July 13, 2010, the Defendant: (a) deemed that, even if the decedent requested the ○○○ Association to contribute shares of the 370,318 shares (hereinafter “the shares of this case”) of the ASEAN (hereinafter “the shares of this case”) constituted inherited property, the Plaintiffs were omitted from filing an inheritance tax return; (b) deemed that the assessed value of the shares of this case is calculated as KRW 1,519,318,00 and calculated as KRW 5,347,363,498; (c) assessed the assessed value of the shares of this case as KRW 5,347,363,498; and (d) stated on July 13, 2010 the Plaintiffs’ additional disposition of the additional KRW 65,15,787 won for the difference between the reported amount and KRW 30,36015,195.

C. The Plaintiffs dissatisfied with the instant disposition and filed a petition with the Tax Tribunal for a trial on August 27, 2010, but the said petition was dismissed on June 28, 201.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

(a) Relevant statutes;

Attached Form 2 shall be as shown in attached Table 2.

(b) Fact of recognition;

1) On March 4, 2003 and February 19, 2008, while the decedent acquired and held the shares of this case, the decedent submitted a securities transaction card and a certificate of stock donation (hereinafter “certificate of stock donation of this case”) with the following purport, including the securities transaction card and seal.

After listing the shares of this case and all property rights related thereto on the securities market or the KOSDAQ market, I will contribute them to the ○○ School located in Daegu Metropolitan City, and will submit a certificate of stock donation.

2) On September 29, 2009, Aex reported securities for the purpose of disclosure to the public. When the instant shares were registered with the KOSDAQ on January 22, 2010 (the public offering was 4,100 won per share), on February 27, 2010, Aex donated the instant shares using a securities transaction card of the deceased on the basis of the securities transaction card of the deceased on the basis of the securities transaction card of the deceased.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3, Eul evidence Nos. 2, 3 and 4, the purport of the whole pleadings

C. Determination

1) Whether the instant shares are included in inherited property

The certificate of stock donation prepared by the ancestor stated that "Ix shall contribute the shares of this case "after listing the securities market or the KOSDAQ market" to the ○○ School. As such, it is reasonable to view that the above certificate of stock donation contains the content of the consent of the decedent under the condition precedent. Therefore, ○○ School, a donee, cannot be said to have the right to claim the transfer of the shares of this case on the ground that the certificate of stock donation was prepared by the ancestor, and only after the commencement of inheritance, Ix may request the transfer of the shares of this case on January 22, 2010 registered at the KOSDAQ market [this case shall be deemed to have been established by submitting the certificate of title 4 and 5 (Evidence 5) to Ix, the representative and the certificate of affiliation of the decedent (the plaintiff's assertion that the gift contract was established by accepting the shares of this case on April 22, 209). Thus, the plaintiffs still have the obligation to suspend the shares of this case on the ground that Ixx shall be deemed to have died at the time of inheritance of this case.

2) Plaintiffs’ assertion and determination

A) Determination on the assertion that non-taxation provisions apply to the taxable amount of inheritance taxes

In light of the purport of Article 13(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”), the Plaintiffs asserted that: (a) even if the Plaintiff did not know whether the instant shares existed or not and there exist extenuating circumstances such as the case where there was no report by the inheritance tax reporting deadline, the Defendant’s act of having the Defendant keep the instant shares donation certificate in Axex constitutes “contribution to a person carrying on a religious business” under Article 16 of the Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Inheritance Tax Act”); or (b) the act constitutes “contribution to a public-service corporation, etc. through trust for religious purposes” under Article 17 of the same Act.

With respect to the interpretation of the tax-related law, it shall be interpreted as a legal interpretation, unless there are special circumstances, regardless of the requirements for imposition or exemption or the requirements for exemption or reduction (see Supreme Court Decision 2007Du9884, Oct. 26, 2007, etc.).

In order to be subject to Article 16 (1) of the Inheritance Tax and Gift Tax Act, the shares of this case should be contributed within the inheritance reporting deadline under Article 67 of the same Act. The plaintiffs' inheritance reporting deadline is October 31, 2009, which was six months from the last day of the month to which April 22, 2009 of the inheritance date belongs. As seen earlier, the shares of this case were transferred to ○○○ School on February 27, 2010, and the circumstances that the plaintiffs knew the existence of the shares of this case do not constitute an inevitable reason under Article 13 (1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act. Accordingly, the shares of this case are not subject to Article 16 (1) of the Inheritance Tax and Gift Tax Act. Moreover, there is no reason to believe that it was an acquisition of trust by the plaintiffs with the permission of the competent authority under Articles 65 and 66 of the Trust Act that stipulate the statutory requirements for the trust of public interest.

B) Determination as to the assertion that the substance over form principle is against

The plaintiffs asserted that since they concluded a donation contract by the decedent and died before transferring the ownership of the shares of this case, it constitutes a private donation in the process of performing the contract, the plaintiffs' imposition of inheritance tax on the property that has not been actually inherited is contrary to

A private donation refers to a donation that takes effect upon the death of a donor (Article 562 of the Civil Act). Since an ancestor expressed his/her intent to suspend the shares of this case upon the death of the donor, and the above suspension conditions have not been fulfilled on the date inheritance commenced, the donation of the shares of this case at the time of the death of the decedent cannot be interpreted as a donation during performance or as a private donation. Furthermore, as seen earlier, since the shares of this case are deemed to be included in the inherited property, imposing inheritance tax is not contrary to the substance over form principle. Accordingly, the above plaintiffs’ assertion is without merit.

C) Whether the calculation of the value of the instant stock is lawful

The plaintiffs asserted that the value of the shares of this case should be included in the value of inherited property, but the value of the shares of this case is 1,212,791,450 won (=3,095 won x 370,318 note) assessed by Ax as of February 22, 2010 by Axx as of February 22, 2010.

Article 63 (2) 1 of the Inheritance and Gift Tax Act provides that "any stocks of a corporation that has filed a securities report with the Financial Services Commission for the purpose of corporate disclosure within the period prescribed by Presidential Decree shall be appraised by the method prescribed by Presidential Decree." Article 57 (1) of the Enforcement Decree of the Inheritance and Gift Tax Act provides that "the above period means the period from June immediately before the date of appraisal as of the base date of appraisal to the date of first listing stocks, etc. on the Korea Securities and Futures Exchange, and the relevant stocks, etc. shall be appraised by the larger price between the publicly offered price and the average closing price for two months before

On September 29, 2009, Ax reported the securities of the instant shares, and the instant shares were registered with the KOSDAQ on January 22, 2010, and at the time, the public offering price of the shares issued by Axx was 4,100 won per share and the Defendant issued the instant disposition based on the above public offering price as seen earlier. However, Article 57(1) of the Enforcement Decree of the same Act provides that the instant shares shall be appraised at a larger price (i.e., the average closing price cannot be calculated because they were not listed for two months before and after the date of commencing the inheritance, which is the date of commencing the public offering). Thus, even if there is no material to know the appraised value under Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, if there is no material to determine the appraised value of the instant shares, the instant disposition based on the public offering price is legitimate in itself, and if there is no greater price, it is no less unfavorable to the Plaintiffs, and thus, it cannot be deemed unlawful.

Therefore, the plaintiffs' assertion that architecture should evaluate the shares of this case at the price on the date of actual contribution is without merit.

D) Whether the imposition of additional tax is lawful

The plaintiffs did not fully recognize the existence of the shares of this case. Since there are justifiable grounds for not including the value in the value of the inherited property, the part concerning the imposition of additional tax among the disposition of this case is unlawful.

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, where a taxpayer violates various obligations, such as a return and tax payment, as prescribed by the tax law without justifiable grounds, the taxpayer’s intent and negligence are not considered as administrative sanctions. On the other hand, such sanctions should be imposed with respect to nonperformance of obligations under the tax law unless there are justifiable grounds for not being able to cause the taxpayer’s failure to perform his/her obligations, such as cases where it is unreasonable for the taxpayer to be unaware of his/her obligations or where it is unreasonable for him/her to expect the fulfillment of his/her obligations (see, e.g., Supreme Court Decision 2010Du1622, Apr. 28, 201).

In light of the above legal principles, Article 67 of the Inheritance Tax and Gift Tax Act, which set the time limit for filing inheritance tax return as six months for the instant case, is intended to enable an heir to know the inherited property of the inheritee after the commencement of inheritance and obtain sufficient time to report it. Considering the purport of the above, it is difficult to view that there is a justifiable reason that the Plaintiffs did not err by failing to report the said stocks as inherited property solely on the ground that the Plaintiffs failed to ascertain the existence of the instant stocks held by the inheritee since 2001. Therefore, the Plaintiffs’ assertion is without merit.

3. Conclusion

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

[Attachment]

Judges Lee Jae-hee (Presiding Judge)