Method of calculating the deemed donation value at issue of capital increase under the old Inheritance Tax Act

In full view of the provisions of Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990); Articles 5, 6, 7, and 41-3 of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 1990); Article 5(5) of the former Enforcement Decree of the Inheritance Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1849, Mar. 9, 191); in the case of capital increase with new stocks, the value of new stocks appraised according to the method of appraisal under the provisions of Articles 5 through 7 of the former Enforcement Decree without considering the change in the value of profit, and then the difference between the value and the amount of payment.

Article 34-4 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 4283, Dec. 31, 1990; see Article 39 of the current Inheritance Tax and Gift Tax Act); Article 5(6)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 1990; see Articles 54 and 56 of the current Inheritance Tax and Gift Tax Act); Article 41-3 (see Article 29 of the current Inheritance Tax and Gift Tax Act); Article 5(5) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance No. 1849, Mar. 9, 191; see Article 56(2) of the current Inheritance Tax and Gift Tax Act

Supreme Court Decision 91Nu9565 delivered on July 28, 1992 (Gong1992, 2593) Supreme Court Decision 92Nu14724 delivered on June 22, 1993 (Gong1993Ha, 2174) Supreme Court Decision 97Nu112 delivered on May 30, 197 (the same purport)

The right to create a ship (Attorney Lee Jae-in, Counsel for the defendant-appellant)

Head of the tax office

Seoul High Court Decision 95Gu7347 delivered on January 18, 1996

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

We examine the grounds of appeal.

Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990) provides that a person who has received profits as prescribed by the Presidential Decree from a person with a special relationship under the Presidential Decree shall be deemed to have received such profits as a donation at the time of receiving such profits, and Article 41-3 of the Enforcement Decree of the same Act (amended by the Presidential Decree No. 13196 of Dec. 31, 1990; hereinafter the same shall apply) provides that the profits at the time of allocation of new stocks to increase the amount of contribution or investment by the corporation shall be deemed to have been distributed to the shareholders who have waived the preemptive right to new stocks in excess of their share ratio, and that the difference between the value of new stocks issued by the shareholders and the value of the donation shall be deemed to have been appraised pursuant to the provisions of Articles 5 through 7 of the Enforcement Decree. Article 5 (6) 1 (b) of the same Decree shall be deemed to have been calculated based on the average value of the above stocks and the value of profits per share without consideration.

In the same purport, the Plaintiff’s assertion that the method of appraisal of preemptive rights or new shares is to be made in accordance with the method of appraisal of the value of deemed donation of this case shall be rejected, and the judgment of the court below that the calculation of the value of deemed donation of this case should be made in accordance with the method of appraisal under Articles 5 through 7 of the Enforcement Decree of the above Act is correct, and there is no error in the misapprehension of legal principles as to evasion of judgment, property

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

Justices Kim Jong-sik (Presiding Justice)