Appropriateness of a return of inheritance tax assessed as business example

It is reasonable to evaluate and report inheritance tax by evaluating non-listed stocks with no evidence of the suspicion of evading inheritance tax.

Article 60 of the Inheritance Tax and Gift Tax Act

1. The part of the disposition imposing inheritance tax of KRW 12,83,93,300 against the plaintiffs on October 14, 2004, which exceeds KRW 768.223.639,00, shall be revoked.

2. The plaintiffs' remaining claims are dismissed.

3. One tenth of the costs of lawsuit shall be borne by the plaintiffs, and the remainder shall be borne by the defendant.

The defendant's disposition of imposition of KRW 12,883,93,300 against the plaintiffs on October 14, 2004 shall be revoked.

1. Details of the disposition;

A. The ○○○○○ was the representative director of the ○○ Housing Co., Ltd. (hereinafter “○○○○”) and owned 120,000 shares out of 240,000 shares of the 240,000 shares issued by the said company (hereinafter “instant shares”). On November 24, 2002, the Plaintiffs, who were their children, succeeded to the instant shares according to their inheritance shares.

B. As between May 20, 200 and May 21, 2003, the Plaintiffs sold 12,800 shares out of the shares of this case to ○○○, ○○○, and ○○○○○, respectively, at KRW 30,00 per share, and filed an application for payment in annual installments, by deeming the sale value as the market price at the time of inheritance of the shares of this case and calculating the inheritance tax amount based on the value of the shares of this case, the total amount of inherited property value of KRW 6,446,448,050 ( KRW 3,600,000 + KRW 2,846,448,050 + Other inherited property amount of KRW 2,846,48,211, double 418,320,210, and the remainder of annual installments.

C. On October 14, 2004, the Defendant issued the instant disposition to additionally impose and notify the Plaintiffs of the total amount of inherited property of KRW 12,883,93,93, and KRW 300 per share in accordance with the supplementary evaluation method as stipulated in Article 60 of the Inheritance Tax and Gift Tax Act and Article 54(1) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 17828, Dec. 30, 202; hereinafter “former Enforcement Decree”). Meanwhile, the Defendant assessed the value of the loss and profit of the instant shares as KRW 206,391 per share in accordance with the supplementary evaluation method as stipulated in Article 54(1) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 17828, Dec. 30, 2002).

2. Determination of legality of disposition

A. The plaintiffs' assertion

The disposition of this case has the following illegal grounds.

(1) From May 20, 200 to May 21, 2002, the plaintiffs sold 12,800 shares out of the shares of this case to ○○○, etc., 30,000 won per share, which is the market price of the shares of this case, but the defendant, without justifiable grounds, rejected it and applied a supplementary evaluation method.

(2) Even according to the supplementary assessment method, Article 54(1) of the Enforcement Decree of the Act prior to the amendment is unlawful against the Inheritance Tax and Gift Tax Act that provides for the principle of marketism. Therefore, the instant disposition based on the illegal enforcement decree is null and void. In this case, the instant shares should be assessed as net asset value in accordance with Article 54(4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, amended by Presidential Decree No. 18177, Dec. 30, 2003, since it is difficult to continue to operate the business due to the death of the

(b) Related statutes;

○ Inheritance Tax and Gift Tax Act

Article 60 (Principles, etc. of Appraisal)

(1) The value of property on which an inheritance tax or a 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"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 6

(2) The market price under paragraph (1) shall be the price which is considered to be normal in the case of free trade between many and unspecified persons and shall include the expropriation price, public auction price and appraisal price, and others which are recognized as the market price under the conditions

(3) In applying the provisions of paragraph (1), where it is difficult to compute the market price, the value assessed by the methods prescribed in Articles 61 through 65 in consideration of the kind, scale, transaction status, etc. of the relevant property

Article 63 (Evaluation of Securities, etc.)

(1) The appraisal of securities, etc. shall be made by the methods as provided in the following subparagraphs:

1. Appraisal of stocks and investment shares:

(c) Stocks and equity shares not listed on the Korea Stock Exchange other than those under item (b) shall be appraised by the method as prescribed by the Presidential Decree in consideration of corporate assets and revenues

○ Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828, Dec. 30, 2002)

Article 49 (Principles, etc. of Assessment)

(1) For the purpose of Article 60 (2) of the Act, the term “those recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the expropriation, public auction price, appraisal value, and appraisal value, etc.” means, in case of sale, appraisal, expropriation, auction (referring to an auction under the Civil Procedure Act; hereafter in this paragraph, the same shall apply) or public auction during a period of not more than 6 months (3 months in the case of donated property) before or after the standard date of appraisal, the amount verified under one of the following subparagraphs:

1. If the fact of sale and purchase of the relevant property exists, the transaction value: Provided, That this shall not include cases where the transaction value is deemed objectively unfair, such as transactions with persons with a special relationship as referred to in Article 26 (4);

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and investment shares not listed on the Korea Stock Exchange under Article 63 (1) 1 (c) of the Act (hereafter in this Article, referred to as the “nonlisted shares”) shall be based on the values assessed by the following formula:

The value per share = The weighted average amount of net profits and losses for the latest three years per share ± the rate prescribed by the Ordinance of the Ministry of Finance and Economy in consideration of the average interest rate formed in the financial market (hereinafter referred to as the “net value of profits and losses”).

(2) Where the value of unlisted stocks appraised pursuant to the provisions of paragraph (1) falls short of the value appraised by the following formula, the value shall be the value appraised by the following formula:

The value per share = the net asset value of the corporation ± (hereinafter referred to as the “net asset value”).

○ Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18177, Dec. 30, 2003)

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and equity shares not listed on the Korea Stock Exchange (hereafter in this Article and Article 56-2, referred to as the “nonlisted stocks”) under Article 63 (1) 1 (c) of the Act shall be the weighted average value of each share of the value appraised by the following formula (hereinafter referred to as the “net value of profit and loss”) and the net asset value per share of 3 and 2: Provided, That in cases of a real estate large-holding corporation (referring to a corporation falling under Article 158 (1) 1 (a) of the Enforcement Decree of the Income Tax Act), the ratio of the net value of profit and loss per share to the net asset value shall be 2 and 3, respectively:

The value per share = The weighted average amount of net profits and losses per share for the latest three years ± the interest rate determined and publicly announced by the Commissioner of the National Tax Service in consideration of the circulation rate of three-year corporate bonds guaranteed by the financial institutions (hereinafter referred to as the “net value exchange rate of profits

(2) The net asset value per share under paragraph (1) shall be the value appraised by the following formula:

The value per share = the net asset value of the corporation ± (hereinafter referred to as the “net asset value”).

(4) In applying the provisions of paragraph (1), in case where the liquidation procedures for the corporation subject to evaluation are in progress or where it is deemed difficult to continue the business due to the death, etc. of the business operator, the inheritance tax and the gift tax and the two association member’s relocation right under Articles 67 and 68 of the Act may be applied, notwithstanding the provisions of paragraph (1), to the net asset value under paragraph (2).

(c) Fact of recognition;

In full view of the evidence Nos. 3, 4, 5, evidence Nos. 6-1 through 4-1, evidence Nos. 8-2, evidence Nos. 1-2, and evidence Nos. 5, witness Nos. 1, and witness Nos. 5, and witness Nos. 3, 4, 5, and 00, respectively, the following facts may be acknowledged:

(1) On April 7, 2003, the Plaintiffs requested ○○ Appraisal Corporation to appraise the value of the instant shares, and around that time, published an advertisement for disclosure sale of the instant shares at ○○ Economic Newspapers.

(2) Based on the net asset value on April 16, 2003, the ○○ Appraisal Corporation assessed the base value on December 31, 2002 of the instant shares as KRW 43,380 per share.

(3) The advertisement did not appear to purchase the shares of this case on behalf of the plaintiffs, and the non-party company requested 10 persons, including the customer love with the network ○○○○ and the ○JC club members, etc. to purchase the shares of this case on behalf of the plaintiffs.

(4) Although ○○○, ○○, ○○, ○○○, and ○○○○○, the instant shares did not express their intent to purchase, it could not be purchased at the appraisal price. On the other hand, the Nonparty Company sent a letter of intent to sell at KRW 35,000 per share, setting the price at KRW 35,00 per share.

(5) Between May 20, 2003 and May 22, 2003, ○○○ continued negotiations with the Non-Party Company, the Plaintiff concluded a sales contract to transfer 2,400 shares to ○○○○○○○, 4,00 shares to ○○○○○○○○, 3,40 shares to ○○○○○○, and 3,000 shares to ○○○○○○○○○, and 3,00 shares to 30,000 shares of acceptance per share.

(6) The non-party company had no particular business performance other than that of constructing and selling the network 16 units of ○○○○-Post Rental Housing Co., Ltd. The amount of income of 54,201,201, 286,000 won, 33,859,625,000 won of income of 202, 3,208,265,000 won of net income of 33,859,625,000 won, net income of 3,208,200 won of income of 4,103,064,000 won of income of -1,792,002,00 won of net income of -1,613,726,000 won of income of 204, -1,969,979,000 won of income of 203.

(7) The Plaintiffs, in addition to the instant shares, succeeded to the amount equivalent to KRW 705,684,648 of cash assets, and KRW 1,759,854,160 of real estate assets.

D. Determination

According to Article 60 of the Inheritance Tax and Gift Tax Act and Article 49 (1) 1 of the Enforcement Decree of the same Act, the value of non-listed stocks subject to inheritance tax shall be calculated based on the market price as of the date of commencing the inheritance, that is, where a transaction is made freely between many and unspecified persons, or where there is a transaction fact in connection with the relevant non-listed stocks during the period of six months before or after the base date of appraisal (excluding cases where the transaction value is deemed objectively unfair, such as a transaction with a person in a special relationship provided for in Article 26 (4)). Only when it is difficult to calculate the market price, the transaction value shall be calculated based on the appraised value as provided for in the Inheritance Tax and Gift Tax Act and Enforcement Decree of the same Act. Therefore, if there is a transaction fact in relation to the relevant non-listed stocks within six months before or after the base date of appraisal, the value of stocks shall be evaluated by considering the market price as of the market price, and the burden of proof as to the fact that there was no such transaction

In this case, it is recognized that the non-party company's shares were not traded before the purchase or sale claimed by the plaintiffs, that the sales price is below net value as well as net asset value, and that ○○○○, etc. who purchased the shares of this case, purchased the shares of this case by the recommendation of the non-party company. The sale or purchase of this case was conducted immediately before the expiration of the inheritance tax reporting period, that the sales price was consistent with each other, that the sales price was 5.3% of the total shares, and that the actual sale or purchase price was merely 705,684,648 won in cash assets and real estate assets were 1,759,854,160 won, and that management rights of the non-party company do not have any particular influence on the management rights of the non-party company.

However, the non-party company is a company that newly built and sold an apartment as an executor, and had not been able to depend on the personal ability of the network ○○○○○○○○○, which had been the representative director. In fact, the actual aggravation of the network ○○○○○○ ex post, and considering that the shares of this case were non-listed shares, it is difficult to view that the sales value of the shares of this case would have increased net asset value as an exceptional case. However, although ○○○○, etc. have a special relationship with the shares of this case, it is not a special relationship as provided in the laws and regulations, it is difficult to ask those who have certain degree of circumstances of the non-party company to purchase the shares of this case. However, it is difficult to say that the plaintiffs inherited the shares of this case to a certain extent under the circumstances of the non-party company, but at the same time, it appears that the plaintiffs used the cash assets to repay them after inheritance of debts equivalent to 320 million won, there is no evidence to determine whether the real estate realization was easy or not.

(b) Justifiable tax amount;

Therefore, the shares of this case should be assessed as 30,000 won per share, which is the above sales price. Based on this, when calculating the plaintiffs' legitimate inheritance tax amount based on this, the part exceeding the above amount among the dispositions of this case is unlawful.

3. Conclusion

Therefore, the plaintiffs' claims of this case are justified within the scope of the above recognition, where it is unnecessary to examine the remaining arguments, and the remaining claims are dismissed as it is without merit (the plaintiff's attorney asserted that he did not claim only the shares of this case out of inherited property during the preparation date). It is so decided as per Disposition.