Plaintiff 1 and two others (Attorney Lee Dong-hee, Counsel for the plaintiff-appellant)

Head of Leecheon Tax Office and one other

April 19, 2006

1. All of the plaintiffs' claims are dismissed.

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

The imposition of gift tax of KRW 1,112,352,00 on September 9, 200 and KRW 101,786,180 on the gift tax against Plaintiff 1 and the imposition of KRW 1,036,926,580 on the gift tax against Plaintiff 3 by Defendant Seosan Tax Office, respectively, and the imposition of KRW 1,036,926,580 on September 1, 2003 by Defendant Seosan Tax Office, respectively, shall be revoked.

1. Details of the disposition;

A. On March 17, 1992, Non-party 1 established Sejong Co., Ltd. Co., Ltd. Co., Ltd. (after that, the trade name was changed to Sejong Chhotech Co., Ltd., Ltd., Small Chystroke and Ehyplate Co., Ltd., and registered on the KOSDAQ on November 22, 1999, and held office as representative director by December 7, 2000, and on February 13, 1996, the non-party 1 changed the trade name to Shypton Co., Ltd. (the second company) to the third company as representative director by April 1, 2001.

B. The Commissioner of the National Tax Service confirmed 1.2. to June 2003 the shares of Samsung 2, 2.0, Samsung 2, 300, 200, 169, 200 shares of Samsung 2, 30.2, 200, 200, 200 shares of Samsung 2, 30, 200, 200 shares shares of Samsung 2, 200, 300, 200, 200 shares shares of 2.3, 200, 200, 30, 200, 200.3 shares shares of Samsung 2, 30, 200, 20, 200, 300 shares shares shares of Samsung 2, 20, 300, 200, 20, 300 shares shares shares shares of Samsung 2, 300, 200, 301 shares shares of the Plaintiff 2.

C. The Defendants deemed that Nonparty 1 acquired the above shares in the Plaintiffs’ name as gift. On September 5, 2003, the head of Leecheon Tax Office rendered a decision on the aggregate of KRW 1,112,352,01,010 (hereinafter “the first disposition”), the sum of KRW 101,786,180, and KRW 190 (hereinafter “the second disposition”), the sum of KRW 190,38,590, and KRW 738,740,510, the gift tax reverted to the Plaintiff 1 on September 5, 2001, KRW 183,222,90, and the gift tax reverted to the Plaintiff 183,202, KRW 1,112,352,00 (hereinafter “the Plaintiff 3, Sept. 9, 200; KRW 101,786,205, KRW 305,206, KRW 485,2005.

D. The plaintiffs filed an objection with the Commissioner of the National Tax Service on November 29, 2003, and received each dismissal decision on March 5, 2004. The plaintiffs 2, May 13, 2004, the plaintiffs 1, and 3 filed a request for an adjudication with each National Tax Tribunal on May 31, 2004. The plaintiffs 2, the plaintiff 1, and the plaintiff 3 received each dismissal decision on February 1, 2005.

[Reasons for Recognition] Gap evidence 1, Gap evidence 2-1 to 3, Eul evidence 1-1 to 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiffs' assertion

① Although there is no agreement with Nonparty 1 on title trust, the Plaintiffs did not have reached an agreement with Nonparty 1 on title trust, they acquired shares of Defendants 1 and 2 and shares of other corporations, such as Samsung Electronic, etc. by stealing the Plaintiffs’ names, and ② Even if Nonparty 1’s acquisition of shares by Nonparty 2 under the Plaintiffs’ names, it cannot be deemed that the second company did not receive dividends as non-listed shares and distributed shares for the purpose of defending management rights, and thus, it cannot be deemed that there was an objective of tax evasion. Accordingly, each of the instant dispositions should be revoked

(2) Plaintiffs 1 and 2’s assertion

① Nonparty 1 acquired 40,00 shares out of the shares of Plaintiff 1 in the name of Plaintiff 1, but sold on April 25, 2002. On December 31, 2000, Plaintiff 2 acquired 85,600 shares out of the shares of Plaintiff 1 in the name of Plaintiff 2, but sold on January 22, 2001. After acquiring 69,000 on May 8, 2001, Nonparty 11,00 shares out of them sold on May 10, 2001. Nonparty 60,120 shares acquired on April 12, 200, and sold on June 10, 2002, it did not constitute a period for reporting gift tax (within 3 months from the date of each acquisition), and on June 10, 2002, Nonparty 1 did not constitute a legal fiction of gift tax in the name of Nonparty 1, regardless of whether or not there was any difference in the amount of gift taxation.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Judgment on the plaintiffs' assertion

(A) Whether the name of the plaintiffs was stolen

1) According to the main sentence of Article 41-2 of the Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter “the Act”), where the actual owner and the nominal owner are different, the value of the property shall be deemed to have been donated by the actual owner on the date when the registration, etc. is made to the nominal owner, notwithstanding Article 14 of the Framework Act on National Taxes.

2) In order to impose gift tax pursuant to the above provision, it is insufficient to say that there is a separate nominal owner other than the actual owner, and that registration, transfer, etc. is completed in the name of the nominal owner. If registration, etc. is made through an agreement or communication between the actual owner and the nominal owner (see Supreme Court Decision 95Nu13531, May 31, 1996), the above provision may not apply, but the burden of proof is borne by the Plaintiffs (see Supreme Court Decision 90Nu5023, Oct. 10, 1990).

3) According to Gap evidence Nos. 3-1 through 3, the application form for the opening of the securities account in the name of the plaintiffs is written in the address column of the non-party 1's address, "Seoul Gangnam-gu Doedong (Sero address omitted). The written body is a non-party 1's address. However, it is hard to find that the above facts alone are insufficient to find that the plaintiffs' name was stolen by non-party 1, and there is no other evidence to find otherwise.

4) In full view of the statements in Gap evidence 2-1 to 3, Eul's evidence 3 and 4, and the purport of the whole arguments in the testimony of non-party 2, the plaintiff 1 and the plaintiff 2 met each time in the second month as a high-ranking district of non-party 1's high-ranking district of the second month. The plaintiffs leased their resident registration certificates to non-party 1 whenever requested by non-party 1. The shares of the first company and Samsung Electronic et al. were the shares of the non-party 1, the plaintiff 1 and the non-party 2 were the shares of the non-party 1, the non-party 1 and the non-party 1, the non-party 2, the non-party 3, the non-party 1 and the non-party 1, the non-party 2, the non-party 1 and the non-party 3, the non-party 1 and the non-party 2, the non-party 1 and the non-party 2, the non-party 1 and the defendant 1 and the defendant 1 and the new securities account directly opened.

The plaintiffs' assertion in this part is without merit.

(B) Whether there was no purpose of evading taxes on the acquisition of shares by the second company

1) The proviso of Article 41-2 of the Act provides that the registration, etc. of property under another person’s name without the purpose of tax avoidance shall not be deemed a donation from the actual owner.

Article 41-2 of the Act recognizes an exception to the substance over form principle to the purport that the tax justice is realized by effectively preventing the act of tax avoidance using the title trust. Thus, the proviso of the same Article shall apply only where the purpose of tax avoidance is not included in the purpose of the title trust, and the tax prescribed in the proviso shall not be limited to the gift tax, and the burden of proving that there was no purpose of tax avoidance in the title trust is the person asserting it, and the actual owner has no purpose of tax avoidance on the sole basis of the fact that there was no purpose of tax avoidance (see Supreme Court Decision 2004Du1421, Jun. 11, 2004).

2) There is no evidence to prove that there was no objective of evading taxes on the acquisition of the Plaintiffs’ shares in the second company.

Rather, comprehensively taking account of the overall purport of the arguments in Eul evidence No. 5, the equity ratio between the non-party 1 and the specially related person on the register of the second company as of December 31, 2000 is 42.1%, and the equity ratio between the non-party 1 and the non-party 1, including the plaintiffs, under a title trust to the high-friendly Gu, etc., is 12.3%, and the equity ratio between the non-party 1 and the non-party 1 is 54.4% in total. From this point, the non-party 1 becomes an oligopolistic stockholder of the second company and is subject to the second tax liability of the second company. In the case of a donation of the shares held pursuant to Article 63(3) of the Act, the non-party 1 considers the amount calculated by adding 30/100 to the appraised value of the shares as the transfer income tax, and thus, the amount to be borne by the capital gains tax is difficult.

This part of the plaintiffs' assertion is without merit.

(2) Determination on the assertion by Plaintiffs 1 and 2

(A) Whether the provision on deemed donation does not apply due to a transfer within 3 months after the acquisition;

1) According to Articles 31 and 68(1) of the Act, where the donated property (excluding money) after being donated is returned within three months from the date of donation, namely, the time limit for report under Article 68, pursuant to an agreement between the parties, pursuant to Article 68, the donation shall be deemed not to have existed from the beginning.

2) The fact that the above plaintiffs acquired the shares of the first company is as stated in the above 1-B. However, there is no evidence to prove that the above plaintiffs transferred the shares on each day they claim.

Even if the above plaintiffs sold the above shares within 3 months from the acquisition date of the gift tax return deadline as alleged by the above plaintiffs, there is no evidence to prove that the above shares were returned to Nonparty 1, the actual owner, or that the sales price of the shares was returned to Nonparty 1, and thus, it does not constitute a case where the property donated within the return deadline under Article 31 of the Act was returned.

The above plaintiffs' assertion in this part is without merit.

(B) Whether there is no purpose of tax avoidance for the acquisition of stocks of other corporations, such as Samsung Electronic, etc.

There is no evidence to prove that Nonparty 1 does not have any purpose of tax avoidance in trading stocks of other corporations, such as Samsung Electronic, etc. in the name of the above plaintiffs.

Rather, according to the Income Tax Act, in cases where dividend income amounts to at least 40,000,000 won consisting of financial income along with interest income, such excess amount shall be assessed by adding it to other income, and Nonparty 1 may avoid the application of the global income tax on dividend income to be received in the name of the Plaintiffs, it cannot be deemed that there was no purpose of tax evasion.

The above plaintiffs' assertion is without merit.

3. Conclusion

The plaintiffs' claims are without merit.

Judges Park Tae-dong (Presiding Judge)