It is legitimate to evaluate non-listed stocks by means of supplementary valuation methods.

It is legitimate to evaluate the value per stock of this case as a supplementary assessment method based on the business performance for the last three years before the date of inheritance of stocks, which is the date of appraisal, in accordance with the relevant Acts and subordinate statutes.

Articles 60 and 63 of the former Inheritance Tax and Gift Tax Act

Cheongju District Court-2015-Gu Partnership-1627 ( October 21, 2016)

KimA

Head of Dong District Office

December 24, 2015

oly 201.21

1. The plaintiff's claim is dismissed.

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

The disposition of imposition of KRW 0,00,000,000 against the plaintiff on March 10, 2014 by the defendant of the Gu office on March 10, 2014 is revoked.

1. Details of the disposition;

A. The Plaintiff was inherited 00,000 non-listed shares of the instant company (hereinafter referred to as “instant shares”) as the husband who was a shareholder of the agricultural company******** (hereinafter referred to as the “instant company”) died on July 15, 2012.

B. On October 30, 2013, the Plaintiff increased the net profit and loss amount for the last three years of the instant company due to the temporary and contingent circumstances, and calculated the net profit and loss amount per share of the instant shares by the supplementary assessment method prescribed by the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011; hereinafter “former Inheritance Tax and Gift Tax Act”), based on Article 56(1)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23591, Feb. 2, 2012; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”). Based on this, the Plaintiff calculated the value per share of the instant shares as KRW 00,700, which is the average value of the presumed profit per share under Article 56(1)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and filed an inheritance tax return.

C. Meanwhile, the director of the Daejeon Regional Tax Office confirmed that the instant company does not fall under any of the grounds provided for in each subparagraph of Article 17-3(1) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 267, Feb. 28, 2012; hereinafter “Enforcement Rule of the former Inheritance Tax and Gift Tax Act”) upon the investigation of the inheritance tax against the Plaintiff from June 27, 2013 to August 25, 2013, it is not justifiable that the Plaintiff calculated the estimated profit by considering the estimated profit and loss value per share of the instant shares as the net value, and it is reasonable to evaluate the estimated profit and loss per share based on the weighted average amount of net profit and loss for the instant three recent years pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, on the basis of which the weighted average amount of net profit and loss per share for the instant three years was KRW 00,370,00 per share.

D. On March 10, 2014, the Defendant notified the Commissioner of the Daejeon Regional Tax Office of the foregoing investigation result, and decided and notified the Plaintiff of the amount of inheritance tax of KRW 0,000,000,373 and the amount of KRW 0,000,917,963 according to the inheritance tax investigation result, and the aggregate of KRW 00,000,567,597,160 (hereinafter “instant disposition”).

E. On April 3, 2014, the Plaintiff requested for adjudication against the Director of the Tax Tribunal, but the said request was dismissed on July 13, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, 5, Eul evidence 1 to 4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant company not only falls under the grounds stipulated in Article 17-3(1)2, 3, and 7 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act, but also falls under such grounds *** farm was expropriated on or around July 201, 201, the total farm size of the instant company was reduced to 1/2 as it was sold on or around April 201, and the tax prior interest of the instant company in 2011 was rapidly increased due to temporary and contingent cases, such as the occurrence of relief station in 2011 and various government compensation arising therefrom, due to the temporary and incidental circumstances arising before the base date of appraisal, and thus, the instant company’s disposition of the instant company was unlawful on the ground that the net profit and loss after the business year to which the base date of appraisal belongs was anticipated to rapidly change compared to the net profit and loss amount for the instant three years, and thus, the value of the instant company’s net profit and loss under Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act was not reflected the future profit amount of the instant case.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Article 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act and Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides for the supplementary evaluation method of unlisted stocks, stipulate that the value of each share of unlisted stocks shall be the weighted average value of net profit and loss per share (the weighted average amount of net profit and loss per share for the last three years years per share ± the rate determined and publicly notified by the Minister of Strategy and Finance in consideration of the rate of return on distribution of corporate bonds with maturity of three years guaranteed by financial institutions) and net asset value per share (the net asset value of the relevant corporation ± total issued

In addition, Article 56 (1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the weighted average amount of net profits and losses for the latest three years per share" shall be the value under subparagraph 1, i.e., [the net profits and losses per share for the business year before the base date of appraisal x 3] £« (the net profits and losses per share for the business year before the base date of appraisal x (2) x (1) x 1/6] 】 It shall be the value calculated by the formula of 1/6; where it is unreasonable to calculate the value under subparagraph 1 for the latest three years due to a temporary contingency case, such as the weighted average amount of profits and losses for the latest three years by the corporation, the value under subparagraph 2, i.e., the weighted average amount of profits and losses per share calculated by two or more credit assessment institutions or accounting corporations within the base date of return on gift tax x the amount of net profits and losses per share before the base date of appraisal x the amount of net profits and losses per share under Article 17 (3).

Meanwhile, each subparagraph of Article 17-3(1) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act provides that the amount of net profit and loss for the preceding three years cannot be calculated, or that it would be unreasonable to calculate the amount of net profit and loss per share based on the amount of net profit and loss for the preceding three years because the amount of net profit and loss for the preceding three years is abnormal. Thus, barring any special circumstance, the amount of net profit and loss per share based on the weighted average amount of net profit and loss for the preceding three years per share, which is the value under Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, cannot be calculated unless there are special circumstances. This legal principle does not include the "average value of estimated profit and loss per share, which is the value under Article 56(1)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is the value under Article 56(1)2 of the former Enforcement Rule, or does not meet the requirements under subparagraph 2, it is unreasonable to calculate the value of net profit and loss per share.

2) In full view of the following circumstances, the circumstances and evidence presented by the Plaintiff alone are insufficient to recognize the company of this case as falling under any of the subparagraphs of Article 17-3(1) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act, and there is no other evidence to acknowledge otherwise, and thus, the Plaintiff’s assertion is not reasonable.

A) The Plaintiff asserts that whether Article 17-3(1)2 and 6 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act falls under Article 17-3(1)6 of the same Act shall be deemed as accident compensation proceeds, and **** the compensation for relocation from expropriation of farm shall be deemed as tangible asset disposal profits, but the Plaintiff’s above assertion is without merit for the following reasons.

(1) The instant company received compensation, etc. for the relief station as indicated below following as a result of the occurrence of the relief station in 2011. Of this, KRW 000,000,690 of the purchase price for the relief station does not constitute compensation for the slaughter of the relief station, and only the purchase and distribution was made through the NAF because it was proved to be normal pigs, and the purchase and distribution was made through the NAF. It is reasonable to view it as the sales rather than the accident compensation profit of the instant company.

(2) *** the instant company’s expropriation around July 201, and the instant company received compensation as listed below. The instant company’s acceptance or transfer of a business entity’s business and the amount of compensation received from a project implementer in relation to the expropriation or transfer of the business entity’s business is capital gains if the content of compensation for any loss of assets, etc. is compensation for any loss of assets, etc., other than the business, or compensation for any loss of income or loss arising from the pertinent business, such as compensation for business suspension, closure, closure, transfer compensation, etc., which is reduced in relation to the pertinent business (see Supreme Court Decision 2006Du9535, Jan. 31, 2008). ** * Of compensation for expropriation * Of compensation for expropriation - while compensation for the above ground of the farm can be deemed as compensation for tangible asset disposal profit, it cannot be deemed as compensation for the type of business related to the pertinent decrease in the nature of income or loss arising from the pertinent business.

(3) Based on this, the ratio of the weighted average total value under Article 17-3(1)2 and 6 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act, calculated on the basis of this, is 37.01% as shown below. The instant company does not fall under the grounds under Article 17-3(1)2 and 6 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act.

B) The Plaintiff, as to whether Article 17-3(1)3 and 7(7) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act falls under ***** the entire farm size of the instant company was reduced to 1/2 as well as the share in sales of standard money due to the expropriation of a farm and the sale of a tone farm. The Plaintiff asserts that the major type of business of the instant company was changed as before and after the evaluation base date, and that the normal period of sales was less than three years.

However, it cannot be readily concluded that the change in the business structure claimed by the Plaintiff, i.e., the sales of self-paid money instead of the standard amount, would cause a significant change in the company’s profit, corporate value, and the value of the instant shares (in the case of self-paid money, not only the amount of inputs less than the standard amount but also the risk of causing diseases, such as possibility of suffering from diseases), and whether there was a change in the business structure of the Plaintiff’s assertion, and whether there was a change in the business structure of the instant company’s corporate value, etc., the Plaintiff did not submit particular evidence. Furthermore, the mere fact that the sales item was changed by selling self-paid money mainly, and thus, it cannot be said that there was a change in the main business type or the occurrence of normal sales. Accordingly, the instant company does not constitute grounds provided for in Article 17-3(1)3 and 7 of the former Enforcement Rule of the Inheritance Tax

3) Meanwhile, regardless of whether the instant company falls under any of the subparagraphs of Article 17-3(1) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act, the Plaintiff asserts that the instant disposition that the Defendant calculated the value of donated property based on the value under Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act and calculated the value of donated property based on the value of donated property is unlawful in this case, as it is anticipated that the instant company would rapidly change the amount of net profit and loss after the business year to which the base date of appraisal of the instant company belongs before the base date of appraisal, due to the temporary and conclusive circumstances that occurred before the base

However, even if the business performance of the instant company becomes worse due to changes in the business structure of the instant company after the appraisal base date and it is predicted that the value of the instant shares will decline, the tax administration requires clarity more than any administrative area, and if considering the risks of changes in the future stock value to the extent that no explicit provision is admitted, it is inappropriate to intervene in arbitrary decisions by the customs authorities or taxpayers, etc., and even if such circumstances are acknowledged as alleged by the Plaintiff, it cannot be readily concluded that the sales of the instant company is reduced or the value of the instant shares is significantly changed due to such circumstance, and it cannot be said that the business performance for the instant three years before the inheritance date does not entirely reflect the future business performance (the sales and profits of the instant company were reduced rapidly in 2013 and increased again in 2014). In light of the Plaintiff’s net asset value per share (i.e., the value of the instant shares traded on January 30, 2013 and the net asset value per share, it cannot be viewed that the Plaintiff’s net asset value per share was considered as unlawful.

3. Conclusion

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