Plaintiff (Attorney Kim Jong-jin, Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

April 23, 2007

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 95,654,980 for the Plaintiff on November 3, 2005 shall be revoked.

1. Details of the disposition;

A. The plaintiff is the largest shareholder of the non-party 1 corporation (hereinafter "the company of this case"). On May 13, 2002, the plaintiff's Dong non-party 2 (hereinafter "the company of this case") transferred the shares 508,000 shares of the company of this case to the non-party 2, who is a related party, through a large-scale trading on the report under the former Rules on the Stock Exchange (Article 30 (1) of the Securities Exchange Business Regulations until the deletion on July 7, 2006) under the former Rules on the Business of the Korea Stock Exchange (Article 30 (1) of the Rules on the Stock Exchange). The plaintiff transferred the shares of this case to 3,450 won (hereinafter "the transfer price of this case"), the market price of the stock of this case, the transfer price of this case, calculated the transfer price per share as the transfer price

B. After investigating the change in stocks with respect to the company of this case, the transfer price of this case cannot be deemed as the market price per share under Article 60(1) of the Inheritance Tax and Gift Tax Act (hereinafter "the Inheritance Tax and Gift Tax Act"). The market price per share under Article 60(1) of the Inheritance Tax and Gift Tax Act shall not be deemed as the market price, and the market price per share under Article 63(1)1(a) of the Inheritance Tax and Gift Tax Act and Article 63(3) of the former Inheritance and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter the same shall apply) shall be deemed as the transfer price calculated under Article 63(1)1(a) of the Inheritance and Gift Tax Act and Article 63(3) of the former Inheritance and Gift Tax Act (amended by Act No. 6780, Dec. 18, 202; hereinafter the same shall apply) shall be deemed as 4,760 won calculated by unfairly applying the transfer price provision of this case 20150.

C. Accordingly, on November 3, 2005, the Defendant corrected and notified the Plaintiff of KRW 95,654,980 for the transfer income tax corresponding to the year 2002 (hereinafter “instant disposition”).

[Recognizing Facts] Unsatisfy, Gap 2, Eul 1

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Article 60(1)1 of the Inheritance and Gift Tax Act provides that “The transfer price determined by the Plaintiff’s transfer price shall be deemed to have been ordinarily constituted when free transaction takes place between many and unspecified persons,” and Article 60(1)1 of the Inheritance and Gift Tax Act provides that “The transfer price of the instant shares shall be deemed to have been determined by the Commissioner of the National Tax Service for the same issue and purchase price to prevent the imbalance of supply and demand and the fluctuation of market price to a specific quantity and to induce competition.” The transfer price of the instant shares shall be deemed to have been determined at a regular market price, not at a time.” The transfer price of the instant shares shall be deemed to have been determined at a price determined by the Presidential Decree, i.e., the objective exchange price formed by a normal transaction, and Article 60(1)1 of the Inheritance and Gift Tax Act shall be deemed to have been determined at a below the market price of the instant shares, and the transfer price of the instant shares shall be deemed to have been determined at a below the market price of the Plaintiff’s 60th of the gift Tax Act.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

Article 101(4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003); Article 167(5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003) provides that the market price shall be the value appraised by applying the provisions of Articles 60 through 64 of the Inheritance and Gift Tax Act and the provisions of Articles 49 through 59 of the Enforcement Decree of the same Act in cases where it is deemed that the tax burden has been unjustly reduced due to the transfer of assets to the person with special relationship at a lower price than the market price. The latter part of Article 60(1) of the former Enforcement Decree of the Income Tax Act, except for cases falling under the provisions of Article 63(2)1 (a) and (b) of the Inheritance and Gift Tax Act, which provides that the value appraised by the method of appraisal stipulated in Article 63(1)1(b) of the former Act shall be deemed to be the market price of stocks.

In applying Article 60(3) of the Inheritance and Gift Tax Act, where it is difficult to calculate the market price in accordance with the provisions of Article 60(1) of the Inheritance and Gift Tax Act, it may be interpreted as a supplementary assessment method applied to cases where it is difficult to compute the market price under Article 63(1)1 of the Inheritance and Gift Tax Act in light of the type, size, transaction status, etc. of the relevant property. However, as seen earlier, it is difficult to interpret the latter part of Article 60(1) of the Inheritance and Gift Tax Act as a supplementary assessment method applied to cases where it is difficult to compute the market price under Article 63(1)1 of the Inheritance and Gift Tax Act, as long as the value of listed stocks assessed under Article 63(1)1(a) of the Inheritance and Gift Tax Act is limited to the market price.

In addition, as alleged by the plaintiff, the Commissioner of the National Tax Service decided to accept the claim in the review of the legality of taxation requested by Nonparty 2 on August 22, 2005, but this is because the shares of this case are listed stocks transacted with the Korea Stock Exchange. Since gift tax against Nonparty 2 is determined after January 1, 2004, it is determined after January 1, 2004, it is hard to interpret that the transfer price of this case constitutes the market price under Article 1817 of the former Enforcement Decree of the Inheritance and Gift Act (amended by Presidential Decree No. 18177 of Dec. 30, 2003) pursuant to Article 4 of the former Enforcement Decree of the Inheritance and Gift Act (amended by Presidential Decree No. 18989 of Aug. 5, 2005) and Article 26 (1) 2 of the former Enforcement Decree of the Inheritance and Gift Act (amended by Presidential Decree No. 18989 of Aug. 5, 2005).

Therefore, without examining further whether the transfer price of this case is the market price under Article 60 (1) of the Inheritance and Gift Tax Act as the transfer price of this case by a large volume sale, the plaintiff's assertion is without merit.

3. Conclusion

Thus, the plaintiff's claim of this case is without merit.

[Attachment]

Judges Park Jong-woo