Examination Inheritance 2014-0015 ( October 15, 2014)

If it is difficult to calculate the market price, the value of shares shall be calculated by supplementary valuation methods.

Among the lawsuit proceedings on the reversion of inherited property, the value of shares was arbitrarily determined and settled in accordance with the agreement with the other party to the lawsuit in order to close the lawsuit, and the market price cannot be deemed to be the market price because it is difficult to calculate the market price, and the price is calculated according to the supplementary evaluation method.

Article 60 of the Inheritance Tax and Gift Tax Act: Principles of Appraisal

2014Guhap2120 Invalidity of a disposition of imposition of inheritance tax

BAA

The director of the Southern Incheon District Office

March 5, 2015

April 2, 2015

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

On December 1, 2013, the Defendant confirmed that the disposition of imposition of KRW 00,000,000 against the Plaintiff (hereinafter referred to as “instant disposition of imposition”) was null and void.

1. Details of the disposition;

A. The Plaintiff’s spouse Hong○○○ (hereinafter “the inheritee”) died on March 31, 2012. On September 27, 2012, the Plaintiff reported KRW 00,000,000,000 of inheritance tax on the total value of inherited property as the spouse of the inheritee.

At the time of the above declaration, the Plaintiff evaluated 334,340,832 won in accordance with the supplementary evaluation methods under the Inheritance Tax and Gift Tax Act as to the non-listed shares 21,784 shares issued by the decedent as a regular business among the inherited property (hereinafter “instant shares”) and included them in the value of inherited property.

B. On February 5, 2013, the Plaintiff filed a request to correct the value of the instant shares to KRW 130,704,000, which is the sales price, on the ground that the Plaintiff sold the instant shares to ○○○○○ by December 26, 2012.

C. From July 15, 2013 to October 15, 2013, the Defendant conducted an on-site investigation of inheritance tax against the Plaintiff. On December 1, 2013, the Defendant assessed the value of the inherited property of the instant case as KRW 334,340,832, which applied the supplementary assessment method as initially reported by the Plaintiff, and determined and notified KRW 00,000,000 of inheritance tax by adding some of the retirement allowances, etc.

D. The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Commissioner of the National Tax Service on March 3, 2014, but the said request was dismissed on April 15, 2014.

[Reasons for Recognition] Unsatisfy, Gap evidence 1, 2, Eul evidence 1 to 4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

On December 26, 2012, the Plaintiff sold the instant shares to ○○○○, 130,704,000 won on December 26, 201, nine months after the commencement date of the inheritance. The Plaintiff asserts that the sale price falls under the normal market price of the instant shares, and that the taxable value of the inheritance tax against the Plaintiff ought to be calculated based on the transaction price

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) The main text of Article 60(1) of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”) provides that “the value of the property on which inheritance tax or gift tax is levied shall be based on the market value as of the date of commencing the inheritance or donation (hereinafter “date of appraisal”).” Article 60(2) provides that “The market value under the main sentence of Article 49(1) of the Inheritance Tax and Gift Tax Act includes the value generally recognized as the market value in cases of free transactions between many and unspecified persons and recognized as the market value, as prescribed by Presidential Decree, such as the expropriation price, public sale price, and appraisal price.” Article 60(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that “Where there is a sale, appraisal, expropriation, auction or public sale within six months before and after the base date of appraisal, it refers to the value verified as prescribed in any of the following subparagraphs.” Article 60(2) provides that where there is a transaction value on the property in question, the market value shall be deemed the market value under the same as the inheritance price under the main provision.

The term "market price" in this context refers to the value that is recognized as ordinary in a case of free trade between many and unspecified persons, i.e., an objective exchange price formed through a normal transaction. Thus, even if there is a transactional example, if it cannot be seen as a price formed through a normal transaction that properly reflects the objective exchange value of inherited property, it shall be deemed difficult to calculate the market price, and the value thereof may be calculated according to the supplementary assessment method stipulated in Article 60(3) of the Inheritance Tax and Gift Tax Act (see, e.g., Supreme Court Decision 90Nu1229, Jul. 10,

2) The following facts can be acknowledged in light of the overall purport of the arguments in Gap evidence Nos. 1, 2, and 3 (including paper numbers), Eul evidence Nos. 3 and 4.

On July 11, 2012, when four months have elapsed since the date on which the decedent died, the △△△△△△△△, a representative director of the ○○ Metal, filed a lawsuit claiming the procedure for the cancellation of ownership transfer registration on the ground of the cancellation of title trust registration, claiming that the △△△△△△△△ entrusted the title of the real estate included in the instant inherited property against the decedent and other inheritors of the decedent (Seoul District Court 2012 Gohap12036).

During the lawsuit at issue, the Plaintiff and the △△△△△△△△△△ had purchased the real estate inherited by the Plaintiff at KRW 750,00,00,000, and received the instant shares from the Plaintiff after evaluating them as KRW 130,704,00 per week (60,000 per week). The Plaintiff and the △△△△△△△△△△△△ agreed to substitute the amount of the instant shares for the repayment of KRW 628,223,163, which the decedent borrowed from the ○○ Metal Co., Ltd., and subsequently, the said △△△△△△△△△△△△△△ was voluntarily withdrawn from the said lawsuit.

3) Comprehensively taking account of the above facts acknowledged in the legal principles as seen earlier, even if the transaction value of the instant shares was made at the expiration of 6 months from the commencement date of inheritance, which is the period stipulated in the main sentence of Article 49(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, as alleged by the Plaintiff, if the transaction value was appropriately reflected in the objective exchange value at the time of inheritance, such transaction value may be deemed as the market value of inherited property if it is deemed as the market value of inherited property. However, the Plaintiff did not sell and purchase the instant shares through ordinary transactions with one of many and unspecified persons, who had no special interest with the Plaintiff, but arbitrarily determine and settle the value of the instant shares under an agreement with the other party to the lawsuit in order to terminate the lawsuit during the lawsuit involving the reversion of inherited property, and it cannot be deemed as having reflected in the objective exchange value formed by ordinary transactions among many and unspecified persons. Accordingly, the imposition disposition of this case calculated based on the supplementary evaluation method as stipulated in Article

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

(c)

Related Acts and subordinate statutes

▣ 상속세 및 증여세법

Article 60 (Principles, etc. of Appraisal)

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal").

(2) The market price referred to in paragraph (1) shall be the value generally deemed to be formed where transactions are made freely between many and unspecified persons and shall include the expropriation price, public sale price, appraisal price, and others recognized as the market price, as prescribed by Presidential Decree

(3) Where it is difficult to compute the market price in applying paragraph (1), the value appraised by any method prescribed in Articles 61 through 65 in consideration of the type, scale, transaction status, etc. of the relevant property shall be deemed the market

Article 63 (Evaluation of Securities, etc.) - Prior to the amendment by Act No. 11845, May 28, 2013

(1) Securities, etc. shall be appraised by any of the following methods:

1. Appraisal of stocks and investment shares:

(c) Stocks and equity shares other than those under item (b), which are not listed in the Korea Exchange shall be appraised by the methods prescribed by Presidential Decree in consideration of the assets, profits, etc. of the relevant

▣ 구 상속세 및 증여세법 시행령(2013. 6. 11. 대통령령 제24576호로 개정되기 전의 것)

Article 49 (General Principles, etc. of Appraisal)

(1) The term "those recognized as the market price, as prescribed by Presidential Decree, such as the expropriation price, public sale price, appraisal price, etc. under Article 60 (2) of the Act means the amount verified as follows, in cases of sale, appraisal, expropriation, auction (referring to an auction under the Civil Execution Act; hereafter the same shall apply in this paragraph) or public sale (hereafter referred to as sale, etc. in this Article) during a period not exceeding six months before or after the base date of appraisal (in cases of donated property, it shall be three months; hereafter the same shall apply in this paragraph) :

1. Where any transaction has occurred in connection with the relevant property, the transaction amount;