Seocho 2010west 1426 ( November 02, 2010)

The appraisal value of unlisted stocks shall not be deemed the market price.

The appraisal value of unlisted stocks cannot be considered as the market price, and the disposition imposed on the supplementary valuation method is legitimate because there is no data to know the value of stocks deemed ordinarily established in the transaction freely conducted between many and unspecified persons within a certain period before and after the date of donation.

2011Revocation of revocation of disposition imposing gift tax, 2880

XX

O Head of tax office

July 15, 2011

September 23, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of gift tax of KRW 158,369,940 against the Plaintiff on December 14, 2009 shall be revoked.

1. Details of the disposition;

A. The XX enterprise corporation (hereinafter referred to as the " XX enterprise") is an unlisted corporation established for the purpose of installing other workshops on October 14, 1991, and KimA worked from the time of incorporation of the XX enterprise, and was employed as the representative director from December 31, 2003 to June 1, 2004. The plaintiff also worked from the time of incorporation of the XX enterprise and was on December 31, 2003 to the representative director of the XX enterprise.

B. On July 6, 2004, the Plaintiff: (a) from KimA holding 45,960 shares (38.3%) of the total number of shares issued by XX company, the Plaintiff acquired 30,840 shares issued by XX company from 30,840 shares issued by XX company; (b) 33,840 shares in total, 33,840 shares (hereinafter “instant shares”) from 11,00 shares issued by XX company from her spouse; and (c) filed a corporate tax return for 2004, stating this in the statement of changes in shares.

C. The Seoul Regional Tax Office: (a) conducted a tax investigation on the change of shares in XX companies from July 31, 2009 to September 8, 2009; (b) determined that the Plaintiff acquired 33,840 shares issued by relevant parties, KimA, and laborB from relevant parties, and received economic benefits equivalent to the difference (11,000 won per share) at a price lower than the market price (36,202 won per share) on July 6, 2004; and (c) notified the Defendant of the above fact on December 4, 2009.

D. Accordingly, by applying Article 35(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the "Inheritance Tax and Gift Tax Act"), the Defendant, on December 7, 2009, deemed that the Plaintiff acquired the shares from a person with a special relationship at a price lower than the market price and actually received the amount equivalent to the difference between the price and the market price as follows: (i) imposed gift tax on the Plaintiff (hereinafter referred to as the "instant disposition").

(A) omit the calculation of the following value of donated:

E. On March 9, 2010, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but the said claim was dismissed on November 2, 2010.

[Ground of recognition] Facts without dispute, Gap's evidence 1 to 4, 6, 7, 8, Eul's evidence 1 to 4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff and thisCC, KimD, KimA, and headE engaged in partnership business and established XX companies in 191. On November 15, 200, thisCC transferred 27,000 shares of which they owned to the Plaintiff on KRW 15,00 per share or KRW 13,00 per share, and KimD transferred 34,80 shares of which they owned on December 31, 2003 at KRW 14,50 per share to the rest of 33,00 shares. The sale of the shares was made on March 6, 2004 at the end of 11,00 shares to the Plaintiff, and the sale of the shares was made on July 10, 204 at the market price of the company’s 10,000 shares at the end of 10,000 shares, which were computed on October 10, 201 based on the objective market price at the end of 10,010 shares.

2) The Defendant issued the instant disposition in the past five years or more after the Plaintiff acquired the instant shares. If the Defendant imposed gift tax on the Plaintiff at a more time, the penalty was imposed, and the Plaintiff also had more evidence to prove that the market price of the instant shares is KRW 11,000 per share. Accordingly, the instant disposition is contrary to the taxation equity.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Judgment on the first argument

According to Articles 60 and 63 of the Inheritance Tax and Gift Tax Act and Article 49(1) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 18989, Aug. 5, 2005; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”), the value of the property on which the gift tax is levied shall be calculated based on the current market price as of the date of donation. If the market price is unknown, the value shall be calculated based on the supplementary evaluation method under Article 63 of the same Act, etc. If the transaction price is objectively deemed as the market price at the time of donation, the transaction price should be deemed as reflecting the general and normal exchange value at the time of donation. In addition, there should be no changes in the price between the gift and the above transaction date (see, e.g., Supreme Court Decision 9Du2505, Feb. 11, 200). Meanwhile, considering that Article 49(1)2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act does not constitute the value of non-listed shares under the first paragraph (2).

In light of the relevant Acts and subordinate statutes and the above legal principles, according to the Plaintiff’s health class, evidence Nos. 6-1, 2, and 3 as to the instant case, it is difficult to recognize the fact that KimD sold shares of the instant company to 14,500 won per share on December 31, 2003, as alleged by the Plaintiff. However, in light of the following circumstances, i.e., (i) KimD’s director and representative director of the relevant company from March 29, 1996 to December 31, 203, it is difficult to view the Plaintiff’s position of 30,000 shares from March 29, 1996 to June 1, 2006 to 31, 200, the value of shares transferred to 30,000 directors from June 29, 200 to June 1, 2004 to 31, 2000.

(ii) Judgment on the second argument;

In light of the fact that the Plaintiff did not report gift tax and the Defendant caused the instant disposition through the tax investigation of the Seoul Regional Tax Office, the instant disposition cannot be deemed to contravene the principle of equity in taxation solely on the basis of the Plaintiff’s assertion. Therefore, the Plaintiff’s assertion on this part is without merit.

3) Sub-decisions

Therefore, the instant disposition imposing gift tax on the Plaintiff according to the supplementary assessment method is lawful.

3. Conclusion

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