National High Court Decision 2001No1280 ( December 01, 2001)

Inheritance

Correction

It is reasonable to impose tax on the transfer value confirmed by the relevant corporation as the market price of the investment, rather than applying the appraisal method of unlisted stocks because the market price of the investment is unclear.

Article 60 of the Inheritance Tax and Gift Tax Act / [The Evaluation of Securities, etc.]

The head of the OO tax office shall rectify the tax base and tax amount with the appraised amount invested by O law firm amounting to 23,300,000 won among inherited property, and the remainder of the claims are dismissed.

1. Facts;

As the claimant died on January 7, 199, 199, the claimant received inheritance of 274 square meters and 219.94 square meters of the OOOOO site in Seoul Special Metropolitan City and 219.94 square meters of the above ground buildings, and reported inheritance tax by evaluating inherited property of 1,52,385,97 won.

As a result of the inheritance tax investigation, the disposition authority decided and notified the inheritance tax amount of KRW 175,59,598,510, which was the first claimant's inheritance tax amount of KRW 497,739,884, which was the increase of KRW 1,969,168,671, compared to KRW 1,471,428,787, which was the first claimant's return.

The appellant appealed against this and filed an appeal on May 31, 2001.

2. Opinion of the claimant and the disposition agency;

A. The claimant's assertion

(1) Of inherited property, the claimant filed an inheritance tax return at a price appraised to sell or purchase the above real estate within six months from the date of commencing the inheritance, with respect to the property of 274m274m2, the same ground building 219.94m2 of the same site, the Seocho-gu Seoul Metropolitan Government OOOOOOO site 270.7m2 of the same site, and the same place of 271.3m2 of the same site, and 3/4m2 of the same site building 327.4m2 of the same site (hereinafter referred to as “sub-owned real estate”), which is appraised to be the basis for the sales price under an IMF situation at the time of the transaction of the real estate, by analogical interpretation that the purpose of appraisal is for the payment of the inheritance tax, and thus, it is unreasonable to impose tax by applying the standard market price, by disregarding the reported value, which is the appraised value.

② The decedent, as an attorney-at-law, has invested in the O law firm. However, the decedent’s death, the decedent’s rights and obligations are extinguished only once, and there is a unique feature that could not be traded to many and unspecified persons, and thus, the decedent’s taxation on the decedent’s investment is unreasonable even though it was refunded within 6 months from the date of commencing the inheritance.

③ It is unreasonable that the time of commencing the inheritance of an inheritee was 06:50 on January 7, 199, and the hospital expenses of the inheritee were 09:0 later on January 7, 1999, after the hospital commenced its business on the same day, and that the hospital expenses of the inheritee were deducted from the hospital expenses paid by the inheritor (hereinafter referred to as “index amount”) as funeral expenses.

(b) Opinions of disposition agencies;

① In light of the fact that the purpose of appraisal in the appraisal report of the key real estate is a general transaction, but the appraisal was not made after the appraisal, and that two or more appraisal were made to determine the sale price is difficult to obtain the general commercial transaction, and that the applicant applied for permission to pay inheritance tax by annual installments on the security of the real estate appraised by the applicant, etc., the said appraisal value is deemed as a purpose of paying inheritance taxes rather than for the sale, and thus, the disposition imposed by the disposition agency is justifiable because it is difficult to regard the appraisal value as the market price.

(2) The receipts presented by the claimant as evidence that he/she transferred 23,300,000 won to face value, and sales contracts presented by the O law firm and the details of changes in investment made by the same legal entity, which are different from each other, cannot be recognized as evidence indicating the actual transaction price. This is merely a document on distribution of investment. Therefore, a disposition imposed by the agency in charge of disposition in accordance with supplementary assessment methods is justifiable because it is difficult to regard the transaction price of investment as

③ Since funeral expenses were directly required from the date of death of an inheritee to the date of funeral, and actually recognized funeral expenses of KRW 9,283,850, and the amount of hospital expenses not paid as of the date of commencing the inheritance falls under the obligation of an inheritee, but the amount unpaid as of the date of commencing the inheritance among KRW 41,673,360 claimed by the claimant is confirmed to be KRW 10,877,700, the disposition imposed by deducting the unpaid amount as of the date

3. Issues and judgments

A. We examine issues ①

(1) Issues

The propriety of the disposition imposed by denying the appraisal value of the key real estate and evaluating it as the standard market price.

(2) Relevant statutes

At the time of establishment of this taxation requirement, the relevant Acts and subordinate statutes are as follows:

(1) The value of property on which the inheritance tax or gift tax is levied under this Act shall be based on the market price as of the date on which the inheritance commences or the date of donation (hereinafter referred to as the “date of appraisal”). In this case, the value assessed by the method of assessment under Article 63 (1) 1 (a) and (b) (excluding the case falling under the provisions of Article 63 (2)) shall be deemed the market

(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 and public auction price, appraisal price, and others which are recognized as the market price under Presidential Decree

(1) For the purpose of Article 60 (2) of the Enforcement Decree of the same Act, the term “those recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the expropriation price, public auction price, appraisal price, etc.” means the amount confirmed pursuant to the provisions of any of the following subparagraphs only where there is a sale, appraisal, expropriation or public auction (referring to an auction under the Civil Procedure Act; hereafter the same shall apply in this paragraph) or public auction during the period from six months before the base date of appraisal (three months in the case of donated property) to the period of

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);

2. In case where there exist the appraisal values assessed by the reliable appraisal institutions as prescribed by the Ordinance of the Ministry of Finance and Economy (hereinafter referred to as the “appraisal institutions”) on the relevant property (excluding the properties stipulated in Article 63 (1) 1 of the Act), for the purpose other than payment of the inheritance tax and gift tax, the average value

Article 61 of the same Act 【Appraisal of Real Estate, etc.】 (1) Appraisal of real estate shall be based on the methods prescribed in any of the following subparagraphs:

1. Land:

The officially assessed individual land price under the Public Notice of Values and Appraisal of Lands, etc. Act (hereinafter referred to as the “officially assessed individual land price”): Provided, That the price of the land for which no publicly assessed individual land price exists, shall be the amount assessed by the superintendent of the competent tax office by the method as determined by the Presidential Decree, taking into consideration the

2. Buildings:

Value based on current prices determined by the Presidential Decree.

(2) Notwithstanding the provisions of paragraph (1), the value calculated and publicly announced by the Commissioner of the National Tax Service each year in consideration of the new construction price, structure, use, location, year of new construction of a building shall be appraised with respect to commercial building or special purpose building meeting the standards determined by the Commissioner of the National Tax Service in consideration of the size

(3) Facts and determination

After inheritance of the disputed real estate, the claimant reported the inheritance tax by evaluating the appraised value of 1,313,492,873 won on June 22, 1999. The disposition agency denied the appraised value reported by the claimant on the disputed real estate and assessed the appraised value of 1,681,565,33 won based on the related data.

According to the appraisal report presented by the claimant, the claimant reported the inheritance tax to KRW 1,247,492,873, the average value of the appraisal value assessed for the purpose of general transaction by the OO appraisal corporation other than the claim on March 10, 1999, and OO appraisal corporation on March 12, 1999, which was after the commencement of the inheritance, and among the key real estate, it is confirmed that the claimant applied for the permission for annual payment of inheritance tax on the land and buildings of OOOOO in Seoul Special Metropolitan City as security.

(unit: Won)

The reported amount of the property director's appraisal corporation's report for the appraisal subject to appraisal shall be 416,591,004,265,60415,60415,931,180, Seocho-gu Seoul Metropolitan Government's share in the predecessor's possession of the building site and building for the appraisal subject to appraisal 832,421,250830,692,650831,561,693

In full view of the above facts, the claimant asserts that the purpose of appraisal of the disputed real estate is a general transaction as shown in the appraisal report, but when applying for permission for annual payment of inheritance tax on June 22, 199, the claimant provided the land and buildings as security among the disputed real estate, according to the certified copy of the register of the disputed real estate, there was no transaction or creation of security, and the appraisal price does not reach the officially assessed individual land price without any special circumstance, and thus, the claimant's assertion that the purpose of appraisal after the commencement of inheritance is not the purpose of paying inheritance tax is difficult to accept.

B. We examine the issues ②

(1) Issues

The propriety of a disposition imposing a tax by evaluating contributions to a law firm as a supplementary evaluation method.

(2) Relevant statutes

(2) Of the inherited property under paragraph (1), those exclusively belonging to the deceased's day, which become extinct due to the death of the inheritee, shall be excluded.

Article 63 of the same Act 【Evaluation of Securities, etc.】 (1) Evaluation of securities, etc. shall be made according to the following methods:

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

(1) Except as provided in paragraph (2), stocks and investment shares (hereinafter referred to as “non-listed stocks”) not listed in the Korea Stock Exchange under Article 63 (1) 1 (c) of the Act shall be subject to the value assessed by the following formula:

The value per share = [The net asset value of the relevant corporation / the total number of issued stocks (hereinafter referred to as the “net asset value”) + the weighted average amount of net profits and losses for the latest three years per share / the average interest rate formed in the financial market (hereinafter referred to as the “net profit and loss value”) ± 2] ¡À2.

(3) Facts and determination

The petitioners inherited 19,417,000 won of the decedent's investment in the O law firm and reported the inheritance tax by transferring 23,300,000 won to 5 persons such as OOO, a member of the O law firm, and 23,30,000 won of the transfer value to 23,30,000 won.

The claimant presented a receipt (A. 21, 1999) while transferring the inherited amount of money to KRW 23,300,000,000. However, according to the 1998 O law firm's capital in the balance sheet of the 1997 business year and the 119,000,000,000, the amount of money invested by the decedent appears to be 19,417,000,000 under the O law firm's list of changes in the shares and equity shares of the 1997 business year, the claimant appears to have transferred the amount of money invested by the decedent to KRW 23,30,00,000, considering that the initial amount of money invested by the decedent was KRW 19,417,00,000, but not reflected in the account book, it is confirmed by the O KimO's certificate of confirmation (A. 23,300,000, Sep. 201).

The disposition agency does not regard the amount of money transferred by the claimant to the 23,300,000 won to the POO, etc. other than the claimant's claim for the amount of money invested by the inheritee as the market price, and it is judged to be 122,171,764 won by supplementary evaluation methods presented by the disposition agency.

Law firms are incorporated under the Attorney-at-Law Act and are only partners, and the financial resources for their activities are the profits reserved in company out of the contributions of the attorneys-at-law who are partners and the income from their activities.

If a partner's qualification is revoked or suspended because a law firm is composed of an attorney-at-law (Article 46 of the Attorney-at-Law Act), its partner shall withdraw from the law firm (Article 46 of the Attorney-at-law Act), and when a partner dies in light of the unique nature of the qualification of an attorney-at-law, he shall withdraw from the law firm and in this case

According to the death of partners of law firm, its heir's contribution to the law firm is determined by all the factors such as partner's initial contribution to the law firm, contribution to the law firm before that partner's contribution to the law firm, and internal reserve fund before that partner's contribution to the law firm.

O law firms, to which the decedent belonged, have reverted the case to each of the attorneys-at-law, are confirmed to vest the case in the revenue amount of each of the attorneys-at-law and to vest only in the revenue amount of the juristic person. The decedent is 79 years of age (1921) at the time of his/her death, and it is found that the decedent was an attorney-at-law at the age of 79 years of age (1921) that he/she was almost rarely a case. Considering this, the O law firm does not apply the provisions of the articles of incorporation that provide for the addition of a certain ratio in addition to the amount of contribution at the time of his/her withdrawal, but takes over the amount of 23,300,000 won calculated on the basis of the initial contribution as the sales amount of his/her investment (the confirmation of the O law representative

In light of the above facts, it is reasonable to evaluate the value of transfer (23,300,000) that is confirmed by the law firm rather than applying the method of appraisal of unlisted stocks as provided in the Inheritance Tax and Gift Tax Act, considering that the market value of the relevant investment is unclear and it is reasonable to evaluate the inherited property by regarding the value of the relevant investment as the market value of the relevant law firm rather than applying the method of appraisal of unlisted stocks as provided in the Inheritance Tax and Gift Tax Act.

C. We examine issues No. 3

(1) Issues

propriety of the disposition of taxation, which is excluded from the liability that deducts the hospital expenses of the disputed amount

(2) Relevant statutes

(1) Where inheritance commences due to the death of a resident, the following values or expenses related to the inherited property or the inherited property as of the date of commencing the inheritance shall be subtracted from the value of the inherited property:

1. Public imposts;

2. Funeral expenses; and

3. Obligations (excluding donations made by an ancestor to his heir within ten years before the commencement date of inheritance, and donations made by an ancestor to a person who is not his heir within five years before the commencement date of inheritance; hereafter the same shall apply in this Article);

(1) The term “public charges and funeral expenses” under the provisions of Article 14 (1) and (2) of the Enforcement Decree of the same Act means taxes, public charges, and other similar expenses, which are succeeded to by the heir, and which are prescribed by the Ordinance of the Ministry of Finance and Economy.

(2) The funeral expenses prescribed in Article 14 (1) of the Act shall be the amount required directly for funerals from the date of the death of the decedent to the date of funeral. In this case, where the amount is less than five million won, five million won shall be the sum, and where the amount exceeds ten million won, ten million won shall be

(1) For the purpose of Article 14 (4) of the Act, the term “those proved by such method as prescribed by the Presidential Decree” means the debts of the inheritee which are actually borne by the inheritor at the time of the commencement of the inheritance, and which are proved by one of the following subparagraphs:

2. For obligations to persons other than those under subparagraph 1, documents evidencing the fact by means of a contract for liability bearing, written confirmation of creditors, documents evidencing the establishment of collateral and the payment of interest, etc.

(3) Facts and determination

From June 17, 1998 to September 24, 1998, hospital expenses related to the decedents are 58,417,200 won to be borne by the principal and 20,795,660 won to be borne by the principal from September 24, 1998 to January 7, 1999, 58,417,200 won to be borne by the principal from among these KRW 79,660,00 to be deposited before the date of commencing the inheritance, and 10,000 won to be borne by the second principal and to be borne by the principal and to be paid only 10,87,700 won to be incurred by the first principal and to be deposited before the date of commencing the inheritance, it is confirmed by the account statement of non-hospitalize hospital expenses issued by the OOOO hospital.

Although the claimant asserts that the issue amount is recognized as a debt, the claimant's claim is confirmed to have paid only 10,877,700 won, which is the unpaid balance as of the date of commencing the inheritance, in the Hospitalization Medical Expenses Statement issued by the OOOO Hospital, as seen above.

D. Accordingly, a request for a trial on this case shall be, as a result of the review, determined in accordance with Article 81 and Article 65(1)2 and 3 of the Framework Act on National Taxes.

Attached Table 3

Claimant’s Statement

sexual resident registration number owner of the name resident registration number OOOOOOOOOOOOOOOOOO of the Seoul Metropolitan Government OOOOOOOOOOOOOOOOOOOO of the Seoul Metropolitan Government OOOOOOOOOOOOOOOOOOOO of the Yeongdeungpo-gu Seoul Metropolitan Government OOOOOOOOOOOOOOOOOOOOOOOO of the Yeongdeungpo-gu Seoul Metropolitan Government OOOOOOOOOOOOOOOO.