Cho High Court Decision 2009Du3940 ( October 24, 2010)

employees of a corporation controlled by investment shall be persons with a special relationship even if there is no shares.

The plaintiff is an employee of a corporation controlled by the transferor of stocks through investment, and even if not, since the transferor does not own stocks, the amount equivalent to the difference between the price of acquisition and the market price of the stocks is deemed to have been donated.

The contents of the decision shall be the same as attached.

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of gift tax of KRW 81,239,340 against the Plaintiff on March 17, 2009 shall be revoked.

1. Details of the disposition;

A. The △△△ Prize Co., Ltd. (hereinafter referred to as “△△△”) is an unlisted company established for the purpose of manufacturing and selling cosmetics on February 27, 1996.

B. The KimA is one of the largest shareholders holding 30% of the total number of issued and outstanding shares in △△△, and the Plaintiff, as the wife of KimA, acquired 4.50 non-listed shares in △△△ in total at KRW 470,000 per share, KRW 21,50,000 per share from YellowB, a director, and KRW 150,000,000 per share (hereinafter “instant transaction”).

C. At the time of the instant transaction on March 17, 2009, the Defendant: (a) deemed that the Plaintiff was donated an amount equivalent to the difference between the market price and the market price pursuant to the above provision of the Act, and imposed KRW 81,239,340 on the Plaintiff’s gift tax (hereinafter “instant disposition”) on the ground that the Plaintiff’s acquisition of 450 shares on the △△△△ at a price lower than the market price by the yellowB at a price lower than the market price was based on the supplementary assessment method; (b) on the ground that the Plaintiff’s acquisition of 450 shares on the △△△△△△ at a price lower than the market price constitutes “acquisition of property at a price lower than the market price from a person with a special relationship” under Article 35(1)(i) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003.

[Ground of recognition] Facts without dispute, Gap 1, 2 evidence, Eul 1 through 4 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 35(1)1 of the Act is not applicable to YB, who is a transferor of the instant transaction, because it is not in a special relationship with the Plaintiff, who is the transferee.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

Article 35 (1) 1 of the Act provides that the transferee of the property shall be deemed to have acquired the property at a price lower than the market price from a person in a special relationship; Article 35 (2) of the Act provides that the transferor shall be deemed to have received the property at a price higher than the market price; Article 35 (2) of the Act provides that the transferor shall be deemed to have received the property at a price higher than the market price; and Article 35 (4) of the Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1817 of Dec. 30, 203; Presidential Decree No. 26 (4), 6, and 19 (2) 2 and 13 (6) 2 and (8) 1 of the Act; Article 4 of the Enforcement Rule of the Inheritance Tax and Gift Tax Act provides that the transferor or transferee (hereinafter referred to as "transferor, etc.") shall be deemed to have received the property at a price higher than the market price; and at least 30 percent of the total number of shares issued and so forth.

Meanwhile, in full view of Article 35(1)1 of the Act and Article 26(4)1 of the Enforcement Decree of the Act, "one shareholder, etc. (in determining whether a person falls under the provisions of Article 19(2)1, 2, 4 through 8 of the Enforcement Decree)," which provides that "one shareholder, etc." shall be deemed "transferee, etc.", and the contents and purport of the latter part of Article 26(4)1 of the Enforcement Decree, whether the relationship between " transferee" and "acquisition" under Article 26(4)1 of the Enforcement Decree.

In determining whether or not a person acquiring the shares of a corporation is a corporation which has invested 30% or more of the total number of shares issued by a person in a relationship under Article 19 (2) (1) through (5) of the Enforcement Decree with a person who has a relationship under Article 19 (2) (1) through (5) of the Enforcement Decree, even if the person acquiring the shares of the corporation did not hold the shares of the corporation prior to the acquisition of the shares, the person acquiring the shares also controls the corporation by investment, and as such, the officer of the corporation controlled by the person acquiring the shares by investment shall be deemed to be in a relationship with the person acquiring the shares.

With respect to this case, the Health Board and KimA are one of the largest shareholders holding 30% of the total number of issued and outstanding shares in △△△, and the plaintiff is a relative of KimA as seen earlier. As such, △△ constitutes a corporation in which at least 30 percent of the total number of issued and outstanding shares are invested by the plaintiff and his relative (GlaA) pursuant to Article 19(2)6 of the Enforcement Decree, etc., and the plaintiff is deemed to have controlled by △△△ pursuant to Article 13(8)1 of the Enforcement Decree, etc. of the Enforcement Decree, along with KimA, by investing at least 30 percent of the total number of issued and outstanding shares in △△△△. Ultimately, yellowB is a director of △△△△△, who is controlled by the plaintiff and KimA through such investment, and at the same time, falls under the interpretation of the above statutory provision, and thus, the plaintiff's assertion is without merit.

3. Conclusion

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