[1] In calculating the value of inherited or donated property, whether it is null and void because it violates Article 49(5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides that transaction values, etc. of other property identical or similar to the pertinent property subject to taxation shall be seen as the market price, or goes beyond the bounds of delegated legislation (negative)

[2] In the case of a tax amount unpaid due to a difference in appraisal of the value of a donated property, whether it is exempt from the subject of imposition of the “additionally paid tax” under Article 78(2) of the former Inheritance Tax and Gift Tax Act (negative)

[1] Article 60 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010) declares the market value principle in the appraisal of inherited or donated property. Article 60(2) provides that the market value shall be formed through general and normal transactions and shall reflect the objective exchange value at an appropriate level, and the specific scope of the market value shall be prescribed by the Presidential Decree. Article 49(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1933, Feb. 9, 2006) provides that the transaction value, etc. of the pertinent property, which is subject to taxation, shall be deemed the market value of inherited or donated property, is an example of the cases where the pertinent provision on the market value of the pertinent property shall not be limited to the transaction value of the pertinent property, which is subject to taxation, which is identical or similar to that of the pertinent property under Article 60(2) of the former Enforcement Decree.

[2] In light of the contents of Article 78(2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139 of Dec. 30, 2006) and the fact that an additional payment for gift tax is to induce a taxpayer to pay the tax in good faith, with respect to the amount not paid by the due date for payment, financial benefits shall be deemed to have been paid for the violation of the obligation for payment, and it is an administrative sanction against the violation of the obligation for payment, etc., it shall not be deemed that even if the amount of unpaid tax is due to a difference in the appraisal of the value of donated property, it shall not be deemed that the subject of the additional payment for arrears is excluded from the subject of the imposition

[1] Article 60 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010); Article 49(5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1933, Feb. 9, 2006) / [2] Article 78(2) (current deleted) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006)

[1] Supreme Court Decision 200Du5098 delivered on August 21, 2001 (Gong2001Ha, 2482) / [2] Supreme Court Decision 96Nu16308 delivered on November 27, 1998 (Gong199Sang, 65) Supreme Court Decision 99Du1557 delivered on September 26, 200 (Gong200Ha, 2249)

Plaintiff (Law Firm Sejong, Attorneys Im Byung-il et al., Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

Seoul High Court Decision 2007Nu9848 decided Oct. 17, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Article 60(1) main sentence of Article 60(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax Act”) provides that “the value of property on which inheritance tax or gift tax is levied shall be the market price as of the date commencing the inheritance or the date of donation (hereinafter “date of appraisal”).” Paragraph (2) of the same Article provides that “The market price under the provisions of paragraph (1) shall be the value which is generally recognized as if a free transaction takes place between many and unspecified persons and which is recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the expropriation, public sale price, and appraisal price.” In addition, the main sentence of Article 49(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1933, Feb. 9, 2006; hereinafter “former Enforcement Decree”) provides that “the value of the relevant property which is identical to or similar to the market price of the relevant property shall be determined as the market price for six months or more.”

As above, Article 60 (1) of the former Inheritance and Gift Tax Act declares the principle of market value in the appraisal of inherited or donated property. Article 60 (2) of the former Inheritance and Gift Tax Act provides that the market value is formed through general and normal transactions, which can be recognized as the market value on the premise that the objective exchange value should be adequately reflected, and delegates a specific scope to the Presidential Decree. The delegation of Article 49 (1) of the Enforcement Decree provides that the transaction value, etc. for the "relevant property" subject to taxation shall be defined as the market value of inherited or donated property shall be a representative case that can be seen as the market value of inherited or donated property (see Supreme Court Decision 2000Du5098, Aug. 21, 2001). Since Article 60 (2) of the former Inheritance and Gift Tax Act does not limit the market value to only the transaction value, etc. of the "relevant property" subject to taxation, which is identical or similar to the pertinent property subject to taxation of this case, the scope of comparison and gift tax provisions of Article 60 (2) of the former Enforcement Decree shall not be included in the market value.

In the same purport, the lower court is justifiable to have determined that the Defendant’s imposition of gift tax of this case, which assessed the value of donated property pursuant to the Enforcement Decree of this case, is lawful. In so doing, the lower court did not err by misapprehending the legal principles on property rights guarantee principles or the limitation of delegation

2. Regarding ground of appeal No. 2

In light of the contents of Article 78(2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139 of Dec. 30, 2006) and Article 78(2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139 of Dec. 30, 2006) comprehensively considering the fact that financial benefits have been paid to the amount that has not been paid by the due date for payment, and that it is an administrative sanction against the violation of the obligation to pay tax, even if the amount of unpaid tax is due to a difference in the appraisal of the value of donated property, it cannot be said that there is a justifiable reason for the payment of unpaid tax (see Supreme Court Decision 96Nu16308, Nov. 27, 1998, etc.).

In the same purport, the court below is just in rejecting the Plaintiff’s assertion that there is a justifiable ground for not being negligent in neglecting the obligation to pay gift taxes, since it is impossible for the Plaintiff, as an individual, to report and pay gift tax by confirming the value of similar transaction cases pursuant to the Enforcement Decree of this case, and there is no error of law such as misunderstanding of legal principles as

3. Conclusion

Therefore, the appeal is 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.

Justices Kim Young-ran (Presiding Justice)