early 2010Ch2291 ( December 23, 2010)

A disposition imposed by evaluating the value of stocks as a supplementary assessment method is legitimate.

Since the value of reported stock cannot be deemed to have been appropriately reflected in the value of objective exchange, a disposition imposing gift tax by deeming that the market value is unclear at the time of donation as a supplementary assessment method is legitimate.

2011Guhap8406 Revocation of Disposition of Imposition of Gift Tax

EA et al.

○ Head of Tax Office and two others

May 27, 2011

June 24, 2011

1. All of the plaintiffs' claims are dismissed.

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

The imposition of gift tax amounting to KRW 94,52,180, which was made by the head of the Jungyang Tax Office on January 6, 2011 against Plaintiff Jeong-A, is revoked on January 10, 201 by the head of the relevant tax office, and the imposition of gift tax amounting to KRW 950,397,140, which was made on January 10, 201 by the head of the relevant tax office and the head of the Gangnam-gu Tax Office with respect to Plaintiff Jung-B on January 1, 2011 by the head of the relevant tax office.

1. Details of the imposition;

The following facts may be acknowledged as either in dispute between the parties or in full view of the purport of the whole pleadings in each statement in subparagraph 1-1 through 6:

A. On August 24, 2007, the Plaintiffs received 34,000 shares of the unlisted company △△△△△△ Co., Ltd. (hereinafter “△△△”) from DoD, respectively, (hereinafter “instant shares”). On November 13, 2007, the Plaintiffs reported and paid KRW 244,80,000, each of the gift tax on the shares transaction in the separate sheet Nos. 1 through 9 of the stock transaction list (hereinafter “the shares transaction Nos. 1 through 9 of the separate stock transaction list”) in the order of priority among the shares transaction list No. 9 of the separate sheet No. 1 through 9 (hereinafter “the shares transaction No. 1 through 9 transaction list”) at the time of donation by considering the market value per share of the instant shares as the market value at the time of donation.

B. On the grounds that the market price at the time of donation of the instant shares is unclear and that the transaction price of the instant shares traded on November 13, 2007 cannot be deemed the market price, the value per share of the instant shares is assessed as 42,470 won according to the supplementary assessment method stipulated in Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (wholly amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter referred to as the “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”). On May 13, 2010, the head of the Native Tax Office assessed the value per share of the instant shares as 503,472,90 won with gift tax on May 13, 2010; and the head of the Native Tax Office imposed the gift tax of 507,574,640 won with the Plaintiff Jeong and the gift tax of 513,160 won with the Plaintiff Jeong.

C. From September 1, 2010 to November 2, 2010, the head of the Seoul Regional Tax Office (hereinafter “Seoul Regional Tax Office”) conducted a corporate tax integration investigation with respect to △△S, and the head of the Gangnam-gu Tax Office additionally imposed gift tax of KRW 437,04,390 on the Plaintiff Jeong Byung on January 6, 201, and KRW 437,103,980 on January 1, 201, and the head of the Seoul Regional Tax Office additionally imposed gift tax of KRW 437,103,980 on the Plaintiff Gangnam-gu Tax Office on January 1, 201 (hereinafter “each disposition of each of the instant dispositions of each of the instant dispositions of each of the instant paragraphs and each of the instant dispositions of each of the instant dispositions of each of the instant paragraphs”).

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

Even in the case of unlisted stocks, if there is an example of normal transactions that properly reflects the objective exchange value of the stocks, the market price shall be deemed to be the market price and the value of the stocks shall be assessed. The △△△△ shares were traded in KRW 20,000 per share at the time of each transaction of this case on November 13, 2007, and each transferor of the instant transaction was a person who acquired the stocks of △△△△ for investment, and even though each of the instant transaction was a reasonable price that reflects the objective exchange value, each of the instant dispositions of this case by the Defendants, who did not regard the transaction value of this case as the market price of the instant stocks, but applied the value according

B. Relevant statutes

The entries in the attached statutes are as follows.

C. Determination

(1) In full view of the provisions of Article 60 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act") and Article 49 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, the market price stipulated in the provisions of the above Act refers to an objective exchange price formed through a general and normal transaction. Thus, even if a transactional example takes place, if it cannot be deemed as a price formed by a normal transaction that properly reflects the objective exchange value of the donated property, it shall be deemed that it is difficult to calculate the market price of the unlisted stocks subject to the donation, and its value may be calculated in accordance with the supplementary evaluation method stipulated in Article 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act (see Supreme Court Decision 2003Du5723, Oct. 15, 2004).

(2) In light of the following circumstances as to this case’s health class, Gap evidence Nos. 5-1 through 5, Eul evidence Nos. 1 and 2, and Eul evidence Nos. 5-1 through 9, each of the following circumstances, which can be known by adding the whole purport of the pleadings, is considered as follows. Each of the instant transactions is freely conducted between many and unspecified persons, and it cannot be deemed that the objective exchange value is reflected properly. Thus, the plaintiffs’ assertion is without merit.

(A) The transferor of the first transaction of this case is JeongD, the father of the plaintiffs and the majority shareholder of △△△△ (148,00 shares, 74%). The transferor of the second transaction of this case is Han-E, the motive of MaD AA high school, and the transferor of the fourth and fifth transaction of this case is MaD's Mad's Mad's Mad' Mad' Mad' Mad' Mad' Ma. The transferor of the 6 transaction of this case is △△. The transferor of the 7 and 8 transaction of this case is the auditor of △△△, and the transferor of the 7 and 8 transaction of this case worked as the parking manager from 203 to △△△△, and the transferor of the 9 transaction of this case is the △△J, the director of △△△△. In other words, the transferor of the 1,2,4,5,7,8,99 transactions of this case is not an executive officer or employee of △△.

(B) The transferee of the transaction of this case Nos. 2 through 9 shall not be deemed as the Plaintiffs or as the directors of △△△, and they also as the ordinary investors of △△.

(C) At the time of investigating the stock change in △△△, the KimL, the transferor of the instant 2 transaction, and ParkF, the transferor of the instant 4 and 5, stated that HoF, the transferor of the instant 2 transaction, sold the shares of △△△△△, and delegated the sales thereof to JungD at an appropriate price. In light of the fact that, as the transferor of the instant 7 and 8 transaction, the SihH, the transferor of the instant 7 and 8, requested the tax official to sell the said shares to the directors of △△△△ at an appropriate price, and that, as such, it stated that the SihK transferred the said shares to 2,00 shares per share, the instant transaction price seems to have been unilaterally determined by MaD or △△△, the largest shareholder of △△△△△△, or the director of

(D) Of the transfer proceeds of No. 2 transaction of this case 160,000,000, 100,000 won, 100,000 won was contributed to the Foundation for △△△ Scholarship, and the remaining 60,000,000 won was invested in the financial instruments of the fund, etc. It may be highly doubtful that the actual owner of each of the transfer proceeds of this case may be a third party, not Kim LL, 8,000,000, out of the transfer proceeds of the 6 transaction of this case, 160,000,000 won was contributed to △△ Scholarship Foundation, and 160,000,000 won was contributed to the transfer proceeds of the 6 transaction of this case, and 160,000,000 won was kept in the management team of △△△△△○.

(E) Considering that the subject of the transaction is unlisted stocks, it is difficult to view that the fact that the transferor and transferee conducted the same price on the same day and the same day as that of another nine times of transaction itself is a normal transaction freely conducted between many and unspecified persons.

3. Conclusion

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