Madern 2013bu 2308

In the case of stock transaction between persons with a special relationship, a low price transfer shall be subject to the provisions of wrongful calculation.

In the case of stock transaction between persons with a special relationship, the transfer value should be applied by deeming the appraised value by the supplementary evaluation method under the Inheritance Tax and Gift Tax Act as the market price.

Article 63 of Inheritance Tax and Gift Tax Act: Appraisal of Securities

Jeju District Court 2013Guhap2147 Revocation of Disposition of Imposing capital gains tax, etc.

AA, BB, CCC

○ Head of tax office

November 26, 2014

January 14, 2015

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

Each disposition (including additional tax) by the defendant against the plaintiffs in attached Form 1 shall be revoked.

1. Details of the disposition;

A. On February 22, 2010, Plaintiff AA transferred 24,000 shares out of the shares of Nonparty A Co., Ltd. to Plaintiff BB, the non-listed corporation, as the representative director and the shareholder of △△ Construction Co., Ltd. (hereinafter referred to as “non-listed corporation”); and on September 15, 2010, Plaintiff BB reported and paid the transfer income tax and securities transaction tax for 20,000 shares out of the shares of Nonparty Co., Ltd. (hereinafter referred to as “each of the above transfers”) to the Defendant for each transfer of 240,000 shares out of the shares of Nonparty Co., Ltd. (hereinafter referred to as “each of the shares transaction”).

B. The Defendant: (a) deemed that the transfer of shares to Plaintiff AB constitutes a low-price transfer among specially related parties under Article 101 of the former Income Tax Act (amended by Act No. 11146, Jan. 1, 2012; hereinafter “Income Tax Act”); (b) denied the transfer income amount reported by Plaintiff A; (c) imposed the Plaintiff’s gains on the Plaintiff under Articles 60 and 63 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter “Inheritance Tax and Gift Tax Act”); and (d) imposed the Plaintiff’s gains on the Plaintiff’s 10,000,000,000,000 won per share on February 5, 2013; and (d) imposed the Plaintiff’s gains on the Plaintiff’s 10,000,000 won per share on March 6, 2013.

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

10,000 won per share, which is the transaction price at the time of each of the instant shares transaction, constitutes an objective exchange price formed through a normal transaction that reflects the objective exchange value at the time, and thus, the Defendant’s disposition of this case is unlawful.

Even if the above value cannot be viewed as the market price, in calculating the weighted average amount of net profit and loss for the last three years per share, in calculating the weighted average amount of net profit and loss for the last three years from the evaluation date, the net profit and loss should be increased for three years retroactively from the evaluation date, and the non-party company should make a prompt reduction in the amount of sales and construction contract since 2009, and in calculating the amount of net profit and loss for the preceding three years from the time of calculating the transfer value according to the supplementary evaluation method in 2009, there is a big difference in the amount of net profit and loss when calculating the transfer value according to the supplementary evaluation method, the defendant made the disposition of this case by adding the amount of net profit and loss for three years from 2007 to 2009, excluding the year 2010. As such, the disposition of this case should be revoked on the basis of the amount calculated excessively in the transfer value due to unlawful evaluation method.

B. Relevant statutes

Attached Form 2 is as shown in the relevant statutes.

C. Determination

1) Whether the transfer value of each of the instant shares transaction can be deemed as the market price

A) Article 60(1) of the Inheritance Tax and Gift Tax Act provides that "the value of an asset on which a gift tax is levied under this Act shall be the market value as of the date of donation." Paragraph (2) of the same Article provides that "the market value under paragraph (1) shall be the value generally recognized as a market value if a transaction is made freely between many and unspecified persons, and shall include the expropriation price, public sale price, appraisal price, and so on, as prescribed by Presidential Decree." Article 49(1) of the Enforcement Decree of the same Act provides that "Article 60(2) of the same Act provides that "the market value recognized as the market value, as prescribed by Presidential Decree, such as the expropriation price, public sale price, and appraisal price" means the transaction value where a transaction has been made with a person with a special relationship within three months before and after the date of donation: Provided, That in cases of unlisted stocks with less market value, if there is an objective unfair transaction value, the transaction value shall be evaluated as the market value, and it shall not be recognized as the normal and objective transaction value at the time of 20.

B) In this case, the following circumstances are comprehensively taken into account: ① at the time of each share transaction, the Plaintiffs calculated the transfer value of each share transaction of this case only with the agreement between the Plaintiffs without undergoing any objective evaluation procedure against the non-party company or the above shares; ② at the time of each share transaction with the Plaintiff AA and BB, the Plaintiff A and the Plaintiff CCC, the number of shares transaction of the non-party company was calculated with the same transfer price for 7 months; ③ the non-party company was calculated with the same transfer price for the non-party company; ③ the non-party company was the spouse of the Plaintiff AB; ④ the Plaintiff CB was the representative of the non-party company and the non-party company, and the Plaintiff CCC was also difficult to view that there was no possibility of stock transaction between the Plaintiff company and the non-party 2’s share transaction at the market price for each of the following reasons: the Plaintiff company’s share transaction price was lower than the market price for each of the non-party 1 and the Plaintiff company’s share transaction with the Plaintiff 250.

Therefore, the plaintiffs' assertion that the application of the supplementary evaluation method under the Inheritance Tax and Gift Tax Act is unlawful without recognizing the transaction value of this case as the market price is without merit.

2) Whether there is an error in the defendant's supplementary evaluation methods

A) Article 63(1)1 (c) of the Inheritance Tax and Gift Tax Act provides that the value of unlisted stocks shall be appraised according to the method prescribed by the Presidential Decree in consideration of the assets, earnings, etc. of the pertinent corporation. Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the value of unlisted stocks shall be appraised according to the weighted average value of net assets per share of 3 and 2, respectively.

The net value per share means the value appraised by the following formula (Article 54(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act):

The value per share = The weighted average amount of net profits and losses for the latest three years per week ¡À an interest rate determined and publicly announced by the Commissioner of the National Tax Service in consideration of the rate of circulation of corporate bonds with three years maturity guaranteed by

The net asset value per share means the value appraised by the following formula (Article 54 (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act):

Value per stock = the net asset value of the corporation concerned ¡À total number of stocks issued.

The weighted average amount of net profit and loss for the preceding three years per share in the calculation method of net profit and loss per share shall be calculated by the following formula (Article 56 (1) 1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act):

The weighted average amount of net profit and loss per share in the last three years;

0

B) In full view of the purport of the foregoing case’s health account, evidence adopted earlier, evidence No. 4, and evidence No. 4 and the purport of the argument, the Defendant may recognize the fact that the Defendant calculated the value of the shares of this case based on the total assets, total debts, and net asset value of the non-party company (as of February 22, 2010, respectively, the base date for appraisal, and September 15, 2010) based on the supplementary assessment method of non-listed shares as stipulated in the Enforcement Decree of the Inheritance Tax and Gift Tax Act and the Enforcement Decree of the same Act.

C) As to this, the Plaintiffs asserts that, when calculating the weighted average amount of net profit and loss for the last three years, the net profit and loss should be calculated for three years, calculated retroactively based on the evaluation base date.

④ Although Article 56(1)1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the value of the net profit and loss for the latest three years shall be calculated based on the average net profit and loss per share of the business year before the base date of appraisal, two times the net profit and loss per share of the business year before the base date of appraisal, and six times the net profit and loss per share of the business year before the base date of appraisal, and the amount calculated based on the average profit and loss per share of the three years before the base date of appraisal shall be calculated based on each business year before the base date of appraisal. Furthermore, the average profit and loss for the latest three years shall be calculated based on each business year before the base date of appraisal, and it shall be calculated based on the average profit and loss per share of the company for the latest three years before the base date of appraisal. It shall be also reasonable to consider the standard of appraisal value of the company's net profit and loss under Article 56(1)1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act to be calculated by 20 years before the base date of appraisal.

3) Therefore, the instant disposition imposed on each share transaction of this case based on the value calculated according to the complementary evaluation method under the Inheritance Tax and Gift Tax Act is lawful.

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.