[1] The case holding that the most paid amount should be included in the net asset value of the corporation in assessing the transfer value of unlisted stocks subject to securities transaction tax

[2] The case holding that where the shares issued by a company are transferred with the right of management and the transfer value is considerably low compared to the assets of the company at the time of donation including the fictitious payment claim against the company's shareholders, the transfer value cannot be deemed as the market value of the company's shares as at the date of donation

[1] Article 7 of the former Securities Transaction Tax Act (amended by Act No. 6302 of Dec. 29, 2000), Article 4 of the former Enforcement Decree of the Securities Transaction Tax Act (amended by Presidential Decree No. 17040 of Dec. 29, 200), Articles 60(3) and 63(1)1(c) of the Inheritance Tax and Gift Tax Act, Article 54(1) and (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660 of Dec. 31, 199), Article 7 of the former Securities Transaction Tax Act (amended by Act No. 6302 of Dec. 29, 200), Article 60 of the former Enforcement Decree of the Securities Transaction Tax Act (amended by Presidential Decree No. 17040 of Dec. 17, 204)

[1] [2] Supreme Court Decision 2005Du5574 Decided August 23, 2007

Plaintiff 1 and one other (Attorney Lee Jae-soo, Counsel for the plaintiff-appellant)

Head of Eastern Tax Office

Seoul High Court Decision 2004Nu14924 delivered on July 15, 2005

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

1. As to Plaintiff 1’s ground of appeal

According to Article 7 of the former Securities Transaction Tax Act (amended by Act No. 6302 of Dec. 29, 200, hereinafter “former Securities Transaction Tax Act”), Article 4 of the former Enforcement Decree of the Securities Transaction Tax Act (amended by Presidential Decree No. 17040 of Dec. 29, 200), Article 63(1)1(c) of the Inheritance Tax and Gift Tax Act, Article 54(1) and (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660 of Dec. 31, 199), the transfer value of the relevant unlisted stocks traded in the Korea Stock Exchange and the stock certificates other than the stock certificates of the Korea Stock Dealers Association (hereinafter “non-listed stocks”), if the transfer value of the relevant non-listed stocks is unknown, or if the value is lower than the value appraised by the method prescribed by Presidential Decree (hereinafter “transfer method”), the transfer value of the corporation’s non-listed stocks shall be appraised by the method of appraisal for less than three years.

According to the reasoning of the judgment of the court of first instance as cited by the court below and the records, it is right that the non-party 1 corporation, including the non-party 1 corporation on November 25, 1998 and the non-party 1 corporation on December 26, 1998, paid the amount borrowed from the paying bank after borrowing money from others as a de facto shareholder of the non-party 1 corporation in order to increase the amount of 2.9 billion won out of the capital stock of the non-party 1 corporation on two occasions (the non-party 1 corporation on June 29, 199, and the non-party 1 corporation on December 30, 199 as at the time of transfer of the non-party 1 corporation including the non-party 1 corporation on December 30, 199, constitutes a corporation less than two years after the commencement of business. Thus, the non-party 1 corporation's most of the payment to the plaintiff 1 corporation on the ground of the above net asset value of the non-party 1 corporation on December 28, etc.

2. As to Plaintiff 2’s ground of appeal

According to the records, although the plaintiff 2 asserted that "the plaintiff 1 transferred the non-party 1 corporation to the non-party 2, etc. over two times on May 3, 2005 as stated in the first date for preparatory pleading, and the transfer value should be recognized as the market price of the shares of the non-party 1 corporation and evaluated the non-party 1 corporation subject to gift tax," the court below did not make any judgment on the above assertion as alleged in the ground of appeal. However, even if there is an error of omission of judgment as to the plaintiff's assertion, it does not affect the conclusion of the judgment if it is obvious that the non-party 2's assertion will be rejected (see Supreme Court Decisions 2002Da5616, Dec. 26, 2002; 2003Da12342, Oct. 28, 2004; 2009Da19819, Oct. 19, 209).

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Ji-hyung (Presiding Justice)