The evaluation of net asset rental apartments is appropriate when the evaluation of unlisted stocks as to the denial of wrongful calculation;

The shares issued by a construction company are not inherited or donated, but a pledge is established or shares are not offered as security for transfer, and the provisions on the appraisal method of the value of the assets offered as security in calculating the value of the rental house in this case for the assessment of the net asset value of the corporation.

Article 81 of the National Tax Collection Act

1. The Defendant’s disposition of imposing corporate tax of KRW 316,487,190 against the Plaintiff on June 10, 2004 shall be revoked.

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

1. Details of the disposition;

A. From November 9, 200 to December 31, 201 of the same year, the Plaintiff evaluated 135,000 non-listed shares (10,000 won per share price per share; hereinafter “instant shares”) issued by ○○ Construction Co., Ltd. (hereinafter “○○ Construction”) as KRW 135,000 per share price per share and assessed 8,250 won per share price as indicated below 4 shareholders, officers, employees, etc. including ○○, the representative director of the Plaintiff as indicated in the following table:

assigned to the Corporation.

Date of transaction

Transferors

A transferee

Relation

Number of Stocks

Price per share

Transaction Amount

Jinay

November 9, 198

(A)Construction in Luxembourg;

friendly ○

Representative and

The largest shareholder

3,758

8,250

31,003,500

November 15, 190

friendly ○

〃 4

24,250

8,250

200,062,500

November 21, 200

friendly ○

〃 4

3,640

8,250

30,030,000

November 30, 190

friendly ○

〃 4

3,030

8,250

24,997,500

December 10, 198

Yang-○

Staff members

7,500

8,250

61,875,000

December 10, 198

○ Kim

Stockholders

25,500

8,250

210,375,00

December 20, 200

friendly ○

Representative

6,060

8,250

49,995,000

December 29, 200

Park ○

Executive Officers

37,500

8,250

309,375,000

Stockholders

December 31, 010

friendly ○

Representative

23,762

8,250

196,036,500

Total

135,000

1,113,750,000

B. The Defendant assessed the value at the time of the transfer of the instant shares in accordance with the method of appraisal under Article 63 of the Inheritance Tax and Gift Tax Act (hereinafter referred to as the "Act"), and assessed the value of the instant rental house with the amount of credit secured by the said rental house (the sum of funds loans and security deposits and subtracting credit guarantee loans) by applying Article 66 of the Act and Article 63 of the Enforcement Decree of the Act, and calculated the value per share of the instant rental house as KRW 13,456 and transferred it to the said transferee by calculating it as KRW 8,250 per share to the Plaintiff and the person in a special relation under the Corporate Tax Act, because it constitutes a low-price transfer under Article 88 (1) 3 of the Enforcement Decree of the Corporate Tax Act (hereinafter referred to as the "Act") and included the transfer of the instant shares in KRW 708,305,374, Jun. 10, 204, and then assessed the amount corresponding to the difference between the transfer and the transfer (hereinafter referred to as "the instant rental house").

C. On August 6, 2004, the Plaintiff filed a national tax appeal seeking revocation of the instant disposition with the National Tax Tribunal, but the National Tax Tribunal dismissed the Plaintiff’s request for national tax trial on May 6, 2005.

[Ground of recognition] Facts without dispute, Gap evidence 1-2, Gap evidence 2-2, Eul evidence 1-2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Article 63(1)(c) of the Act delegated the Presidential Decree to assess unlisted stocks in consideration of assets, earnings, etc., and Article 54(2) of the Enforcement Decree of the Act is invalid since the limitation and scope of delegation under Article 63(1)(c) of the Act, which stipulates that the value of net profits and losses falls short of net asset value, would be evaluated by net asset value, thereby simultaneously consider assets and profits. The Defendant’s disposition was unlawful since the instant disposition was made by evaluating the value of unlisted stocks based on Article 54(2) of the Enforcement Decree of the Act, which

(2) When assessing the price at the time of the transfer of the instant shares pursuant to Article 54 (2) of the Enforcement Decree of the Act, in applying Article 66 of the Act and Article 63 of the Enforcement Decree of the Act, when calculating the market price of the instant rental apartment which constitutes the net asset value, the instant rental apartment as security for national housing loans borrowed when ○○ Construction newly constructed the said apartment, and thus, the amount of the instant rental apartment as security for the relevant property is only included in the above national housing loans, but is excluded from the lease deposit return claim, which is merely a simple use value, and even if not, the price of the instant rental house should be determined based on the standard market price of the instant rental house or the market price appraisal result at the time of the price of the transfer of the said stocks. However, it is unlawful for the Defendant to include the rental deposit refund claim in calculating the market price of

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

(1) The Defendant calculated the net asset value per share by deducting the total amount of liabilities from the total amount of assets of ○○ Construction at the time of each relevant transfer date, as described in the table of Paragraph 1-A, and calculated the average net asset value per share by dividing it by the total number of outstanding stocks (150,000 shares) of the Kudong Construction, as stated in the table of Paragraph 1-A.

(2) The Defendant included the instant rental housing in the total amount of assets, and applying the provisions of Article 66 of the Inheritance Tax and Gift Tax Act, the value of the said rental housing was calculated by adding the rental deposit to KRW 16,605,771,00 in the total amount of the national housing loans secured by the said rental housing, and as a result, the value of the instant rental housing was assessed to KRW 29,406,771,000.

(3) Meanwhile, according to the appraisal result that the court set the point of time for the instant rental house as of December 31, 2001, the price of the instant rental house is 24,460,369,000 won.

[Ground of recognition] Facts without dispute, Eul evidence 2 and 9 each 1 to 6, Eul evidence 10, the result of appraisal by ○○○○, the purport of the whole pleadings

D. Determination

According to Article 60 of the former Inheritance Tax and Gift Tax Act, the value of the property on which the inheritance tax or gift tax is levied shall be based on the market price as of the date of commencing the inheritance or the date of donation. However, in cases where it is difficult to calculate the market price, it shall be based on the value appraised by the methods prescribed in Articles 61 through 65 in consideration of the type, size, transaction circumstances, etc. of the relevant property. Meanwhile, Article 66 of the same Act provides that the value of the property on which the mortgage is established shall be the larger of the value appraised by the methods prescribed by the Presidential Decree based on the amount of the claim secured by the relevant property, etc. notwithstanding the provisions of Article 60 and the value assessed by the provisions of Article 60. Therefore, the interpretation of tax laws and regulations shall not be permitted in accordance with the principle of no taxation without the law, unless there are special circumstances. Article 66 of the same Act is clear that it is a provision on inheritance or gift property under the legal system.

In addition, Article 89 (2) 2 of the Enforcement Decree of the Corporate Tax Act excludes those cases where the market price is unclear by applying mutatis mutandis the provisions of Articles 38 through 39-2, and Articles 61 through 64 of the same Act, and Article 66 of the same Act excludes those cases where the provision of this Act is applied. In assessing shares, the method of evaluation under Article 66 of the Act and Articles 55 and 63 of the Enforcement Decree of the Corporate Tax Act can be applied only to the cases where shares are inherited or donated and a pledge is established or shares are offered as a collateral for transfer. In addition, the method of evaluation under Article 89 (2) 2 of the Act and Articles 63 (1) 1 (c) of the Enforcement Decree of the Corporate Tax Act and Article 54 of the Enforcement Decree of the Inheritance Tax Act are included only in the case where the net asset value of the corporation in question is assessed for the purpose of calculating the market price per share pursuant to Article 66 of the same Act and Articles 55 and 63 of the former Enforcement Decree of the Inheritance Tax Act.

In this case, ○○ Construction’s shares do not constitute inheritance or donated property, but do not constitute a pledge or offer shares as a security for transfer. However, in a case where the Defendant assessed the net asset value of ○○ Construction to calculate the market price per share in accordance with Articles 89(2)2 and 63(1)1(c) of the Enforcement Decree of the Corporate Tax Act and Article 54(2) of the Enforcement Decree of the Corporate Tax Act as it is difficult to identify the market price of the transferred shares at the time of transfer of the shares due to the denial of the calculation of unfair act under the Corporate Tax Act, since the Defendant assessed the net asset value of ○○ Construction in order to calculate the market price per share of the shares at the time of transfer of the shares, there is no room to apply the provisions of Article 66 of the Act and Article 63 of the Enforcement Decree of the Corporate Tax Act, which stipulate the method of appraisal of the property value calculated as a security for the assessment of the net asset value of the corporation’s net asset value. Therefore, in calculating the net asset value per share value of the instant shares, it should not be viewed.

However, as a result of the appraisal by the court of this case, the fact that the market price of the instant rental house was 24,460,369,000 as of the date of the instant stock transfer is as seen earlier, and based on this, if the value of the instant rental house is assessed based on the above, the Defendant also recognized that the net asset value of ○○ Construction constitutes -2,85,591,292, and thus, the value per share of ○○ Construction is lower than 8,250 won transferred by the Plaintiff. Thus, the Plaintiff’s act of transferring the instant shares does not constitute a low-price transfer under Article 88(1)3 of the Enforcement Decree of the Corporate Tax Act. Accordingly, the instant disposition based on the premise that the act of transferring the instant shares constitutes a low-price transfer under the above provision is unlawful without further determination.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition by admitting it.

Relevant statutes

Corporate Tax Act

Article 52 (Dispudiation of Wrongful Acts)

(1) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through transactions with persons with a special relationship as prescribed by the Presidential Decree (hereinafter referred to as "specially related persons"), he may calculate the amount of income for each business year of the relevant corporation regardless of the activities or calculation of the amount of income of the relevant corporation (hereinafter

(2) In the application of the provisions of paragraph (1), the standard for judgement shall be the prices applied or to be applied in sound and generally accepted practices and normal transactions between persons without any special relationship (including rates, interest rates, rents, exchange rates and other corresponding rates; hereafter in this Article referred to as “market prices”).

(4) In applying the provisions of paragraphs (1) through (3), matters necessary for the types of wrongful calculation and the assessment of market price shall be prescribed by the Presidential Decree.

Enforcement Decree

Article 87 (Scope of Person with Special Relationship)

(1) “Person with a special relationship as prescribed by the Presidential Decree” in Article 52 (1) of the Act shall mean a person with a relationship falling under any one of the following subparagraphs with a corporation (hereinafter “person with a special relationship”):

1. Persons recognized as exercising real influence over the operations of the concerned corporation, such as exercising the right to appoint officers or determining the course of business (including persons to be treated as directors under Article 401-2 (1) of the Commercial Act) and their families;

2. Stockholders (excluding minority shareholders, etc.; hereafter in this Sub-section the same shall apply) and their relatives;

Article 88 (Calculation Type of Wrongful Acts)

(1) The term “if it is deemed that any act makes the burden of tax reduced unreasonably” in Article 52 (1) of the Act means the case falling under any of the following subparagraphs:

3. Where assets are transferred or invested as investment in kind with no compensation or at a price below the market price;

Article 89 (Scope of Market Price, etc.)

(1) In the application of the provisions of Article 52 (2) of the Act, if there is a price generally traded between many and unspecified persons other than a person with a special relationship or between a third party who is not a person with a special relationship, the price shall apply.

(2) In applying Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following provisions:

2. The amount appraised by the mutatis mutandis application of the provisions of Articles 38 through 39-2, and 61 through 64 of the Inheritance Tax and Gift Tax Act. In applying mutatis mutandis the provisions of Article 63 (2) 1 of the Inheritance Tax and Gift Tax Act and Article 57 (1) and (2) of the Enforcement Decree of the same Act, "the immediately preceding six months (three months for stocks, etc. upon which gift tax is levied)" shall be deemed "the immediately preceding six months", respectively.

Inheritance Tax and Gift Tax Act

Article 60 (General Rules, 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 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 type, scale, transaction status, etc. of the relevant property.

(4) In applying the provisions of paragraph (1), the value of the donated property to be added to the value of the inherited property pursuant to the provisions of Article 13 shall be the market price as of

Article 63 (Appraisal of Securities, etc.)

(1) The appraisal 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

Article 66 (Special Cases of Appraisal of Properties with Mortgage, etc.) The larger amount between the value assessed according to the Presidential Decree on the basis of the amount of claims secured by the relevant property and the value assessed according to the provisions of Article 60 shall be the value of the relevant property, notwithstanding the provisions of Article 60:

1. Property whose mortgage or pledge is settled;

2. Transferred property;

3. Property registered for lease on a deposit basis (including property leased in return for lease deposit);

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

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and contribution shares not listed on the Korea Stock Exchange (hereafter in this Article, referred to as “nonlisted stocks”) under Article 63 (1) 1 (c) of the Act shall be the value 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 profit and loss value”).

Article 55 (Calculation Method of Net Asset Value)

(1) The net asset value under Article 54 (2) shall be the value obtained by subtracting liabilities from the value appraised under Articles 60 through 66 of the Act as of the evaluation base date.

(2) In applying the provisions of paragraph (1), the amount related to the evaluation of assets and liabilities such as deferred assets, reserve funds and allowances as prescribed by the Ordinance of the Ministry of Finance and Economy, shall be deducted or added from the value of assets

Article 63 (Appraisal of Properties for which Mortgage, etc. is Established)

(1) The term “value appraised under the conditions as prescribed by the Presidential Decree” in Article 66 of the Act means the amount falling under one of the following subparagraphs:

1. The value of the property on which a mortgage (excluding joint mortgage and mortgage) is created, shall be the amount of the claim secured by the relevant property;

2. The value of the property on which a joint mortgage is created, shall be the amount of the claim secured by the property concerned, calculated proportionally by its value as of the base date of appraisal of the property jointly mortgaged

3. The value of assets on which the right to collateral security is created, shall be the amount of claims secured by the relevant assets as of the evaluation

4. The value of the pledged property and the property transferred for security shall be the amount of claims secured by the relevant property.

5. The value of property registered for lease on a deposit basis (where lease is made in return for lease deposit, the lease deposit).

(2) Where the same property is composed of multiple bonds (including security deposits for lease on a deposit basis and security deposits) as security in appraising the property under each subparagraph of paragraph (1), it shall be the sum of the amount of claims secured by such property.