Appropriateness of a disposition imposing gift tax based on the value of donated stocks appraised by calculating the value of real estate owned by the company in accordance with Article 9(4) of the former Inheritance Tax Act

Article 9 (4) of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990) which applies mutatis mutandis to gift tax under Article 34-5 of the same Act shall not apply to the case where a mortgage, pledge, etc. is established or a lease contract is de facto concluded, and where a mortgage, etc. on other property which is the basis of calculating the value of donated property is established, the assessment of the property shall not be based on the application of Article 9 (4) of the same Act and Article 5-2 of the Enforcement Decree of the same Act, and the calculation of the value of donated property shall not be made. Thus, in the case of stocks of donated property, the method of assessment under the above provision shall be applied only when a pledge is established or offered as a security for transfer, on the ground that the market value of donated stocks is difficult to understand. Thus, Article 5 (1), (5) 1 (b) and (c) of the Enforcement Decree of the same Act and Article 9-2 of the same Act shall not apply until the assessment of net asset value of the relevant corporation is calculated by the method of gift property.

Articles 34-5, 9(1), and 9(4) of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990); Articles 42, 5(1), 5(1)(b), 5(1)(c), and 5-2 subparag. 6 of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196 of Dec. 31, 190); Articles 42, 5(1), 5(1)(c), and 5-2(6) of the former Enforcement Decree of the Inheritance Tax Act

Plaintiff 1 and 3 others, Counsel for the plaintiff-appellee

Head of Gangnam District Tax Office and one other

Seoul High Court Decision 93Gu3754 delivered on March 2, 1994

All appeals are dismissed.

The costs of appeal shall be assessed against the defendants.

We examine the grounds of appeal.

Article 9 (4) of the Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990; hereinafter the same shall apply) applies to the gift tax under Article 34-5 of the same Act, where a mortgage, pledge, etc. is established or a lease contract is de facto concluded on the donated property itself, and where a mortgage, etc. is established on other property which is the basis of calculating the donated property, etc., the application of Article 9 (4) of the same Act and Article 5-2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 13196, Dec. 31, 1990; hereinafter the same shall apply) shall not apply to the assessment of the donated property and the disposal of the property based on it shall not be based on the assessment of the donated property. Thus, it shall not be deemed that the assessment method under Article 5 (1), (5) 1 (b) and (3) of the Enforcement Decree of the same Act is unlawful after calculating the net asset value per share.

All arguments are without merit.

Therefore, all appeals by the defendants are dismissed, and all costs of appeal are assessed against the defendants who have lost them. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee In-hee (Presiding Justice)