[1] Whether the appraisal price of a reliable appraisal institution can be deemed as the market price (affirmative)

[2] Whether the provision of Article 41(1) of the former Enforcement Decree of the Inheritance Tax Act, which is the basis for determining whether a gift is deemed as low-price transfer, applies to the case where the market price can be calculated

[1] Article 34-2(1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) provides that in case where a property is transferred to a specially related person as consideration of the significantly low value, the transferor shall be deemed to have donated an amount equivalent to the difference between the price and the market price at the time of transferring the property to the transferee at the time of transferring the property. The market price here refers to the objective exchange price formed through a normal transaction in principle, but it includes the value assessed in an objective and reasonable manner. Thus, in case where there is no exchange price through a transaction, the appraisal price of a reliable appraisal institution may also be deemed as the market price.

[2] Article 41 (1) of the former Enforcement Decree of the Inheritance Tax Act (amended by the Presidential Decree No. 15193, Dec. 31, 1996) provides that the value of inherited property shall be the market value in principle; Article 34-2 (1) of the former Inheritance Tax Act (amended by the Special Act No. 5193, Dec. 30, 1996) provides that "any value which is considerably low" shall be the market value in cases where the market value cannot be calculated based on the current status of the date of commencing an inheritance or the date of donation; Article 5 through 7 of the Regulations on Supplementary Method when it is difficult to calculate the market value; Article 9 (2) of the same Act provides that "the value of inherited property shall be calculated based on the market value," and Article 34-2 (1) of the same Act provides that "the value of inherited property shall be calculated based on the difference between the market value and the value appraised under the provision of Article 34-7 of the same Act and the market value."

[1] Article 34-2 (1) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see current Article 35 (1) 1 of the Inheritance Tax and Gift Tax Act) / [2] Article 9 (2) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see current Article 60 (3) of the Inheritance Tax and Gift Tax Act), Article 34-2 (1) (see current Article 35 (1) 1 of the Inheritance Tax and Gift Tax Act), Article 41 (1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 15193 of Dec. 31, 196) (see current Article 26 (1) of the Inheritance Tax and Gift Tax Act)

[1] Supreme Court Decision 92Nu8897 delivered on April 13, 1993 (Gong1993Sang, 1414), Supreme Court Decision 94Nu5472 delivered on September 27, 1994 (Gong1994Ha, 2890), Supreme Court Decision 94Nu15325 delivered on May 26, 1995 (Gong1995Ha, 2295), Supreme Court Decision 2000Du5098 delivered on August 21, 2001 (Gong201Ha, 2482)

Plaintiff 1 and one other (Attorney Lee Jae-soo, Counsel for the plaintiff-appellant)

Head of Gangnam District Tax Office and one other

Seoul High Court Decision 2000Nu15776 delivered on July 12, 2001

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

1. Regarding ground of appeal No. 1

Article 34-2(1) of the former Inheritance Tax Act (amended by Act No. 5193, Dec. 30, 1996; hereinafter referred to as the "former Inheritance Tax Act") provides that if the property is transferred to a person with a special relationship for consideration of the significantly low value, the transferor shall be deemed to have donated an amount equivalent to the difference between the price and the market price at the time of transfer of the property to the transferee. This refers to the objective exchange price formed through normal transactions in principle. However, since this is a concept that includes the value appraised in an objective and reasonable manner, if there is no exchange price through transactions, the appraisal price of the appraisal institution can be deemed to have been the market price (see Supreme Court Decision 94Nu15325, May 26, 199). Meanwhile, the provision on the valuation method of the current market price under Article 34-2(1) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 15193, Dec. 31, 1996).

In light of the above legal principles and records, the court below is just in holding that the transaction of the real estate in this case with the price not exceeding 68% of the appraisal price at the time of transferring the real estate to the plaintiff 1 in a special relationship with the plaintiff 2 cannot be deemed as the market price since it does not correspond to the objective exchange price formed by a general and normal transaction. The appraisal price at the market price at this case's real estate in this case's market price is assessed by a reliable appraisal institution in a normal and reasonable manner, and therefore, it should be judged whether it constitutes a price with a significantly low value under Article 34-2 (1) of the former Inheritance Tax Act. There is no error of law by interpreting the purport of the provision of Article 34-2 (1) of the former Inheritance Tax Act and Article 41 (

2. As to the grounds of appeal Nos. 2 and 3

In light of the records, the court below is just in holding that it is difficult to recognize the economic rationality of the transaction between the plaintiffs since the plaintiff 2 was not allowed to have sold the real estate of this case to the plaintiff 1 in light of the financial ability, debt condition and contents at the time of transfer of the real estate of this case, market price and collateral value of this case, and there is no error of law such as misunderstanding of the legal principles as to the denial of unfair calculation regulations under Article 170 (8) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994) or misunderstanding of legal principles as to the deemed donation under Article 34-2 (1) of the former Inheritance Tax Act in relation to the above determination of the court below.

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

Justices Lee Jae-in (Presiding Justice)