A. Whether the transaction price of stocks can be deemed the market price of stocks where stocks are transferred together with the management right of the company (negative)

B. Whether Article 5(1) of the Enforcement Decree of the Inheritance Tax Act applies mutatis mutandis to the determination of the standard market price, which is the basis for calculating transfer margin (negative)

(a) If shares issued by a company are transferred along with the management rights of the company, the transaction value shall not be deemed the market value that reflects the objective exchange value when only shares are transferred.

B. Article 23(1)3 of the Income Tax Act and Article 44-2(1)1 of the Enforcement Decree of the same Act where stocks which are taxable objects of transfer income tax are transferred pursuant to Article 23(1)3 of the same Act, Article 60 of the Income Tax Act and Article 5 of the Enforcement Decree of the Inheritance Tax Act applied mutatis mutandis pursuant to Article 115(1)3 of the same Enforcement Decree of the same Act shall apply mutatis mutandis only paragraph(5) and Article 115(1)1 of the same Act shall be excluded since the term “market price” is the same as “actual transaction price” under the Income Tax Act.

Article 115 (1) 3 of the Enforcement Decree of the Income Tax Act, Article 5 of the Enforcement Decree of the Inheritance Tax Act

Supreme Court Decision 80Nu543 Delivered on February 23, 1982, 85Nu208 Delivered on September 24, 1985

[Judgment of the court below]

The Head of the Maternization Tax Office

Seoul High Court Decision 87Gu815 delivered on July 7, 1988

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

1. We examine the first ground for appeal.

If shares issued by a company are transferred together with the management right of the company, the transaction price shall not be deemed the market price that reflects the objective exchange value when only shares are transferred (see, e.g., Supreme Court Decisions 80Nu543, Feb. 23, 1982; 85Nu208, Sept. 24, 1985).

In accordance with the records, the court below recognized the fact that the shareholders of the non-party Scar Development Co., Ltd, including the plaintiff, transfer all of their shares and the above company and management rights to the non-party et al. in gold KRW 1,300,000,000. The court below held that it was illegal that the defendant's actual transaction price of transfer was determined as the market price of the above shares, and it is hard to conclude that the purchase price of shares including the management rights of the above company was the reasonable price of shares only. Thus, the judgment of the court below is in accordance with the above opinion, and there is no error of law as

2. We examine the second ground for appeal.

Article 23 (1) 3 of the Income Tax Act and Article 44-2 (1) 1 of the Enforcement Decree of the same Act in cases where stocks which are taxable objects of capital gains tax are transferred pursuant to Article 23 (1) 3 of the same Act and Article 5 of the Enforcement Decree of the Inheritance Tax Act applied mutatis mutandis pursuant to Article 115 (1) 3 of the same Enforcement Decree shall be deemed to apply mutatis mutandis only paragraph (5) and excluded from paragraph (1). The reason is that Article 5 (1) of the Enforcement Decree of the same Act can be deemed to apply mutatis mutandis to "market price" as "actual transaction price" as "transfer price and acquisition price" under the Income Tax Act, so if Article 5 (1) of the Enforcement Decree of the same Act is applied mutatis mutandis, it should be calculated based on the standard market price, and it would result in unreasonable results that can be calculated based on the actual transaction price.

According to the facts duly confirmed by the court below, the transfer value and acquisition value can be confirmed among the transfer value or acquisition value under each subparagraph of Article 170 (4) of the Enforcement Decree of the Income Tax Act, which provides that the transfer value and acquisition value shall be based on the actual transaction value, as an exception to the application of the standard market price in this case, and the other should be determined based on the standard market price, i.e., the transfer value and acquisition value as the assessment amount under Article 5 (5) 1 (b) of the Enforcement Decree of the Inheritance Tax Act.

However, the court below held that the transfer and acquisition value to be applied to the calculation of gains on transfer of non-listed stocks such as the stocks of this case shall be based on the market price if the market price is known, and that if it is difficult to calculate the market price, the valuation value under Article 5 (5) 1 (b) of the Enforcement Decree of the Inheritance Tax Act shall be based on the valuation value under the above provision of Article 170 (4) and the proviso of paragraph (1) of the same Article of the same Article of the Enforcement Decree of the Income Tax Act, since there is no reason to determine the transfer value and acquisition value according to the same standard market price. In this regard, there is a misapprehension of legal principles as to the above provision of Article 115 (1) 3 of the Enforcement Decree of the Income Tax Act.

However, the court below further determined that the contract of stock transfer of this case was illegal to recognize the transfer value by settling the actual transaction price of this case immediately at the market price of this case in the absence of any evidence to deem that the actual transaction price of this case properly reflects the objective exchange value of stocks, since the contract of stock transfer not only the entire stocks of this case, including the plaintiff's stocks, but also the management right of this case is a contract, and therefore it is difficult to conclude that the transfer value should be calculated by determining the transfer value as the standard market price under Article 5 (5) 1 (b) of the Enforcement Decree of the Inheritance Tax Act in this case where no material to recognize the market price at the time of transfer and acquisition is available. Accordingly, the court below's above misunderstanding of legal principles has no effect on the conclusion of the judgment of this case. Accordingly, this point is without merit.

3. Therefore, the appeal shall be dismissed and all costs of appeal shall be assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Chang-chul (Presiding Justice)