[1] The purport of Article 13(1) of the former Inheritance Tax and Gift Tax Act

[2] The case holding that it does not go against the prohibition of double taxation or the principle of substantial taxation that the appraisal of the value of the land already included in the taxable value of the inherited property as the living donated property does not go against the principle of substantial taxation, in the appraisal of the value of the

[1] Articles 13(1)2, 28(1), and 60(1) and (4) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of December 29, 200) / [2] Articles 13(1)2, 28(1), 60(1) and (4), and 63(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039 of December 29, 200), Articles 54(2) and 55(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of December 29, 200)

Plaintiff 1 and one other (Attorney Kim Won-won, Counsel for the plaintiff-appellant)

Samsung Head of Samsung Tax Office (Attorney Kim Young-soo, Counsel for defendant-appellant)

Seoul High Court Decision 2003Nu21031 delivered on November 24, 2004

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

1. Based on its employment evidence, the court below acknowledged that the deceased's deceased (the deceased's deceased's deceased) operated the non-listed non-listed company (hereinafter "non-listed company"), died on September 28, 200. The deceased's property was donated to the non-party company on December 29, 199. According to the deceased's death, the plaintiffs succeeded to the shares of the non-party company held by the deceased (hereinafter "the shares of this case"). The defendant deducted the value of the shares of this case as at the time of donation from the non-party company under Article 13 (1) 2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 29, 200; hereinafter "the Act"), and as at the same time, the value of the shares of this case is calculated by adding the value of the shares at the time of donation to the gift value of the non-party company under Article 63 (1) 1 (c) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree of this case No. 2014).

Furthermore, the lower court determined that the assessment of the value of the instant shares, based on the net asset value of the non-party company, including the instant land, may be deemed separate taxation, in accordance with the method of assessment stipulated in Article 63(1) of the Act, Article 54(2) and Article 55(1) of the Enforcement Decree of the Act, based on the method of assessment stipulated in Article 63(1) and Article 55(1) of the Act, where the value of the instant shares is added to the value of the inherited property, the relevant corporation’s net asset value is excluded from the net asset value of the relevant corporation when the value of the instant shares is added to the value of the inherited property. If the value of the instant shares is assessed based solely on the assets of the non-party company, other than the instant land, on the basis of only the value of the instant shares, the economic benefits derived from the donation of the instant land would be transferred to the Plaintiffs without any tax burden, and thus, would be contrary to the purport of the inheritance tax system, whether to add the value of the donated property to the inheritance tax, and the extent and period of the instant land.

2. Article 13(1) of the Act provides that the value of inherited property donated within a certain period prior to the commencement of inheritance shall be added to inherited property by transferring the property subject to inheritance tax in the form of donation in order to prevent any act of avoiding or reducing the burden of inheritance by the progressive tax rate and thereby promoting fair tax burden. However, in order to prevent double taxation, the Act provides that the value of the biological donated property added to inherited property shall be based on the market price as of the date of donation, not the commencement of inheritance, and the amount of the gift tax on the biological donated property added to inherited property shall be deducted from the calculated amount of inheritance tax (Articles 60(4) and 28(1)). Meanwhile, the valuation of the value of inherited property shall be based on the market price as of the commencement of inheritance (Article 60(1) of the Act), and the net asset value, which serves as the basis for the supplementary assessment method for unlisted stocks, means the value of the property held by the relevant corporation as of the base date of appraisal, which is the net asset value of the deceased company as of this case (Article 5(1).

In full view of the above evaluation principle of inherited property, legislative purport of including living donated property in the taxable value of inherited property, and relevant provisions, the value assessed as the market value as of the date of donation of the instant land to the non-listed company prior to the date of commencing the inheritance shall be included in the taxable value of inherited property. The value of the non-party company’s non-listed stocks, which is inherited property, at the time of commencing the inheritance, is assessed in accordance with complementary evaluation methods under the Enforcement Decree of the Act, and is assessed to include the value of the instant land donated by the deceased in the net asset value of the non-party company, even

The judgment of the court below which has the same purport is just, and there is no error of law such as misunderstanding of legal principles as to the method of appraisal of unlisted stocks.

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

Justices Kim Yong-dam (Presiding Justice)