Appropriateness of the supplementary assessment methods

If the actual value of shares is substantially distorted, the value by supplementary assessment methods can not be recognized.

Article 60 of the Inheritance Tax and Gift Tax Act:

1. The Defendant’s imposition of gift tax of KRW 610,762,970 on October 01, 2004 against Plaintiff Park ○○ on the part of 2004 and the imposition of KRW 27,789,40 on the gift tax of KRW 27,789,40 on the part of Plaintiff Park○ in the same year shall be revoked.

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

We examine the grounds of appeal.

1. Details of the disposition;

A. The ○○○○ was the largest shareholder holding 140,575 (37.09%) out of the total shares of 379,009 shares issued by ○○ Electric Industry Co., Ltd. (hereinafter “Nonindicted Company”). At the time of October 08, 2001, 76.14 shares out of the said shares, and 11,373 shares out of the said shares were transferred to the Plaintiff Park○, the representative director of the Nonparty Company, to the Nonparty ○○○, who is a director of the Nonparty Company (hereinafter “instant shares”).

B. On October 01, 2004, the defendant deemed that the plaintiffs acquired the shares of this case at a low price at a low price, and applied the constructive gift provision of Article 35 of the Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter referred to as the "former Act"). In assessing the market price of the shares, the defendant calculated the net value per share by applying the method of appraisal pursuant to Article 63(1)1(c) of the former Act and Article 54(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828, Dec. 30, 2002; hereinafter referred to as the "former Enforcement Decree") as 21,570 won (the net asset value is higher than 10,557 won, so the amount equivalent to 200 won per share, 2010 won per share, 2050, 2010 won per share, 70.

[Ground of Recognition] Facts without dispute, entry in Gap 1, 1, 2, 1, 2 out of Eul 1, and purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

The instant disposition is unlawful on the following grounds.

(1) In the case of a small-tier company’s shares, there are other trading cases (5,000 won per trading value per share) made on the date when the plaintiffs acquired the shares of this case, and other trading cases (5,000 won per trading value per share) made on the date when the plaintiffs acquired the shares of this case, such trading value shall be deemed the market price, and the market price of the shares of this case shall not be calculated according to the supplementary assessment methods adopted by the defendant.

(2) Even if the market price can be calculated by supplementary valuation methods for household affairs, 21,570 won per share value of net profit and loss based on the value of net profit and loss shall not be considered as a legitimate market price, as it substantially distorted the actual value.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Facts of recognition

(A) Sales cases of the shares of the non-party company

On October 13, 2001, 200, the non-party company, a Japanese shareholder of the non-party company, transferred 35,684 shares owned to the non-party company's officers and employees, including the plaintiffs, at KRW 9,000 per share. The non-party company's Da○○ Scambling ○○, Japan, transferred 914 shares to the non-party company's employees and employees on May 1, 03.05 of the same year 820 United Nations (the exchange rate of KRW 8,521 shares at that time) Japan, and on March 08, 2001, Japan transferred 53,058 shares owned by the non-party company's employees and 7 employees of the non-party company at KRW 5,00 per share.

(B) Change in sales amount of the non-party company

In comparison between the 200 business year and the 2001 business year, the sales revenue, operating income, and net income of the non-party company for the last ten years has increased by 30% from 7,391,00,000 to 9,648,000,000 won in the case of sales. In the case of operating income, 1,242,00,000 won from 291,000 to 1,242,000,000 won in the case of operating income. Meanwhile, in the case of the 2000 business year, a relatively large amount of net income compared to the operating profit is included in 866,00,000 won in the disposal profit of tangible assets and 47,00,000 won in the business compensation due to the expropriation of the ○○ factory.

(unit: million won)

Gu Sector

1994

195

196

1997

1998

199

200

201

202

2003

Sales

6,773

10,310

15,379

10,995

6,308

4,342

7,391

9,648

9,468

8,325

Operating Income

146

1,391

1,935

1,611

921

105

291

1,242

109

-1,334

Rosters

Benefits

193

1,167

1,540

1,654

1,395

372

1,33

1,280

188

533

(C) Distribution status of the non-party company

From the business year of 198 to the business year of 2002, the non-party company paid cash dividends to shareholders for the earned surplus. During the above period, the amount of dividends to the plaintiff Park Jong-○ has reached KRW 980,000,000, and the amount of dividends to the plaintiff Park Jong-○ was KRW 410,000,000.

(unit: Won)

Gu Sector

Park ○ ○

x ○ ○

1998

131,250,000

50,000,000

199

5,250,000

2,000,000

200

340,620,00

129,756,000

201

435,701,500

207,265,500

202

71,587,500

21,630,000

Consolidateds

984,409,000

410,651,500

(D) Product liability of the non-party company

The non-party company manufactured the machinery and equipment for the manufacture of the bridge and supplied it to the U.S. ○○○○○ through the ○○ Electronic Co., Ltd., and around 1998, when the ○○○ operated the machinery, the accident occurred due to the defect of the machinery, one employee was liable for damages, and the non-party company agreed between the ○○ Electronic Co., Ltd. and the non-party company to bear USD 30,000 on August 29, 2002. These circumstances were reflected in the 2001 and 2002 Non-indicted.

[Ground of recognition] Facts without dispute, Gap 3 through 8, Gap 11, Eul 6-1, Eul 8-1 to 10, Eul 9-1 and Eul 2-1 and the purport of the whole pleadings

(2) whether the market price is calculated by supplementary assessment methods

First, as to whether the transaction value of 9,000 won per share and 3,521 won per share in the same year can be recognized as the market price of the stock of this case, the health class, and the above transaction cases do not take place within 3 months before or after the base date of appraisal under Article 49(1) of the former Enforcement Decree from the date of the transfer of the stock of this case from March 08, 2001 to the date of appraisal of the stock of this case. Thus, if there are special circumstances that make it possible to regard the value as the market price at the time of the base date of appraisal, the transaction value can be recognized as the market price on the base date of appraisal. However, as recognized earlier, since the transaction value differs from the sales and operating income for 200 business years and 201 business years, it is difficult to recognize as the market price of the stock of this case as it is.

Next, with regard to whether the trading value of KRW 5,00 per share, which was traded on the same day as the stocks of this case, can be recognized as the market price of the stocks of this case, there was a trend of continuously increasing sales and operating income from the business year 1999 to the business year 2001, as seen earlier, since 1998, cash dividends have been paid to shareholders every year (the amount of dividends that the plaintiffs received according to this is limited to the annual amount of KRW 5,00,000 per share) and the amount of KRW 10,557 per share does not exceed half of the net asset value calculated in accordance with Article 54(2) of the former Enforcement Decree. Considering that the trading value of KRW 9,00 per share on March 13, 200, and KRW 8,521 per share on May 1, 203, the trading value of KRW 190 per share cannot be objectively excluded from the market price under the proviso of Article 54(2) of the former Enforcement Decree.

Therefore, since the shares of this case are difficult to calculate the market price, it cannot be assessed by the supplementary evaluation method prescribed by the Presidential Decree considering the assets, profits, etc. of the non-party company pursuant to Articles 60(3) and 63(1)1(c) of the former Act. The plaintiffs' assertion on a different premise is without merit.

(3) The adequacy of 21,570 won per share, calculated by supplementary assessment methods;

As seen earlier, under Articles 60(3) and 63(1)1(c) of the former Act and Articles 54 and 56(1)1 of the former Enforcement Decree, the Defendant calculated the value of the instant shares as KRW 21,570 per share, and the following is deemed as to the legality of the said value.

In general, there is a method based on the net asset value in assessing the shares of the company. Article 54 of the former Enforcement Decree provides that the net asset value shall be based only on the net asset value when assessing the unlisted shares. If net profit or loss falls short of net asset value, the net profit or loss value shall be calculated retroactively from the evaluation base date. Here, the net profit or loss value shall be calculated based on the net profit or loss for three years retroactive from the evaluation base date, and among them, the net profit or loss value shall be relatively higher than the net profit or loss value of the previous year and year before the previous year where the weight 2 and the previous year are given. However, the net profit or loss net is not only an inherent capacity or value of the company itself, but also a significant change from time to time by external factors such as changing the market price or market situation, and it is more reasonable to apply the new and outstanding valuation method to the net asset value to be determined by the Presidential Decree, which is an absolute increase in the net asset value for the immediately preceding year.

In the case of this case, the defendant reflected only the net value in the valuation of the stocks of this case in the relationship of exceeding the net value of the stocks of this case. The net value of the profit and loss of this case 21,570 won is more than 10,557 won in the valuation of the net value of the stocks of this case, and the net value of the profit and loss of this case 2000 won in the net value of the 2000 business year which reflects the largest ratio in the calculation of the net value of the profit and loss as well as the net value of the 866,000 won in the disposal profit of tangible assets and the operating compensation of 47,00,000 won in the expropriation of ○ factory of this case. The net value of the product liability litigation related to the product liability litigation, which was appropriated in the year 201 and 2002 except such contingent profits, shall be calculated as 10,092 won in the calculation of the net value of the stocks of this case, and it shall not be recognized as 15750 won in the actual valuation method of the shares.

Therefore, the plaintiff's assertion pointing this out is with merit, and the disposition of this case based on the premise that the above value is the market price of the shares.

(4) Scope of revocation

Furthermore, it is difficult to calculate a reasonable tax amount with respect to the scope of revocation of the disposition of this case only with the materials submitted by the parties, and the entire disposition of this case must be revoked.

3. Conclusion

Therefore, the plaintiffs' claims are reasonable, and it is decided as per Disposition by admitting them.