National Tax Service Review Donation 2012-002 (Law No. 17, 2012)

It is legitimate to calculate the appraised value per share before the capital increase based on the supplementary evaluation methods based on the balance sheet for the settlement of accounts.

It is reasonable to see that the balance sheet for the settlement of accounts close to the day immediately before the payment date of the stock price reflects the net asset value of the non-party company. Therefore, it is legitimate to calculate the assessment value per share before the capital increase based on the supplementary evaluation method.

Article 63 (Appraisal of Securities, etc.)

2012Guhap3428 Revocation of Disposition of Imposition of Gift Tax

The AAA

Head of the District Tax Office

March 8, 2013

March 29, 2013

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing gift tax of KRW 000 (including additional tax) against the Plaintiff on December 2, 2011 shall be revoked.

1. Details of the disposition;

A. BBB, the Plaintiff’s children, owned 100% of the shares ofCC (CCB). On July 14, 2005, the board of directors passed a resolution to increase capital from 000 won to 000 won, and issued 80,000 won per share to 00 won per share. The next BBB waived waived the preemptive right, and the second BB’s external control over the second BB, acquired 40,000 won each share to 00 won.

B. On October 1, 2009, the Defendant imposed gift tax 0000 won (including additional tax) on the following BB on the ground that “the Plaintiff paid the share price at the borrowed account, and trusted the shares to this DD and EE. The value per share of new shares is KRW 000, and it received profits from high-value issuance from the Plaintiff, a special supervisor, and received profits from high-value issuance of new shares.”

C. The secondBB filed a request for review on January 8, 2010, and received a decision of dismissal from the Commissioner of the National Tax Service on March 30, 2010. The secondBB filed a lawsuit claiming the revocation of gift tax in this Court (2010Guhap26704) and submitted a balance sheet for the settlement of accounts (hereinafter referred to as "the balance sheet") dated June 30, 2005 during the lawsuit. The secondBB obtained the Seoul High Court's decision on March 3, 201 from this Court on the ground that "the defendant can calculate the value per share before the capital increase in accordance with the supplementary settlement balance sheet close to the preceding day of the date of the payment of the stock price ( July 15, 2005), while the second BB was sentenced to the dismissal of the first 2010 Seoul High Court's decision on December 31, 2004, as 2016.

D. On December 2, 2011, the Defendant imposed gift tax 0000 won (including additional tax) on the Plaintiff on the ground that “The net asset value of the non-party company according to the family balance sheet is KRW 000 as indicated in Table 1 below, and the value per share before the evidence is 000 won as listed in Table 2 below, and the value per share after the capital increase is 000 won (i.e., KRW 40,000 + KRW 80,000 + KRW 000 + KRW 80,000)/120,000).”

(Omission of Net Asset Value of Table 1)

(F) The omission of the value per share before the capital increase by Table 2)

E. The Plaintiff filed a request for review on January 4, 2012, and received a decision of dismissal from the Commissioner of the National Tax Service on July 17, 2012.

[Reasons for Recognition] The whole purport of the arguments, as described in Gap, Eul, Eul, Eul, Eul, Eul, and Eul, and Eul

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The instant disposition based on which the balance sheet was not reported at the tax office, merely was made by the previous sheet compilation, and was unlawful.

(2) The balance sheet for the provisional settlement of accounts is over-appropriating assets and under-appropriating liabilities, and the net asset value per share before and after the capital increase is corrected as follows, the net asset value is 000 won, and the value per share after the capital increase is 000 won. Therefore, the profit so divided is 00 won ( KRW 40,000 + 5,000 + 80,000 won + 800,000 won). Therefore, the disposition in this case is unlawful.

(A) From May 1, 2005 to June 30, 2005, the average amount was assessed as KRW 000,000 for shares of FF Industry Co., Ltd. (hereinafter referred to as “FF”), a listed company.

(B) The Defendant shall appropriate the Plaintiff’s interest cost of KRW 000,000 (= KRW 000 x9.5% x1/2) for unpaid costs on the ground that “the Plaintiff lent money free of charge to the non-party company that was a deficit corporation from January 1, 2003 to December 31, 2004, and donated the non-party company’s 2003 business year and 2004 business year to the non-party company’s 2003 business year and 2004 business year.”

(C) The allowance for bad debts for credit account receivable has not been appropriated in the amount of 000 won, and should be added to the liability.

(D) The depreciation reserves for buildings and fixtures are included in the balance sheet of December 31, 2004, and half of the depreciation reserves for buildings and fixtures among the balance sheet of December 31, 2005 should be added to the liabilities (=00 won of building 000 + equipment 000 won).

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) On July 1, 2005, the non-party company purchased an officetel located in Seocho-gu Seoul Metropolitan Government OOdong in KRW 000.

(2) As of December 31, 2004, and June 30, 2005, the bad debt reserve of the credit account receivables are not appropriated on the balance sheet.

(3) From January 1, 2003 to December 31, 2004, the Plaintiff leased KRW 000 to the non-party company as a deficit free of charge.

(4) The book value of the building and fixtures of the non-party company and the current status of depreciation reserves are as indicated below in the list 3.

(5) The Defendant assessed FF’s shares, which are listed companies, as the average daily market price at the Korea Stock Exchange every two months before and after the evaluation base date.

(Omission of Current Status of Book Value and Depreciation Reserve)

[Reasons for Recognition] The entry into Gap evidence 3, Eul evidence 1, 2, 3, and 7 through 10, and the purport of the whole pleadings

D. Determination

(1) As to the balance sheet of the provisional settlement

(A) According to Article 55(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18989, Aug. 5, 2005; hereinafter the same), and the Regulations on the Establishment and Operation of Committee of Unlisted Stock Appraisal Council" [Attachment 8] of the Guidelines for Calculation of Evaluation Difference Calculation, and the net value shall be assessed according to the conditions of assets and liabilities on the balance sheet as of the evaluation base date.

(B) According to the above facts, the Plaintiff purchased officetels on July 1, 2005.

However, the nextBB received a favorable judgment by submitting a provisional balance sheet in the lawsuit of revocation of gift tax, and the nextBBBB is a shareholder of the non-party company, and the base date for appraisal is inconsistent with the end of the business year, so it is necessary to calculate the net asset value by making a provisional settlement as of the base date for appraisal, and the plaintiff is unable to submit materials to accurately verify the assets and liabilities of the non-party company as of the base date for appraisal, and considering the increase in net asset value when reflecting officetels in assets, it is reasonable to view that the net asset value of the non-party company is reflected in the net asset value of the non-party company. Therefore, the above argument of the plaintiff, which is different from this premise, is without merit.

(2) As to the appraisal value of FF shares

According to Article 63 (1) 1 (a) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007), and the assessment of stocks traded with the Korea Stock Exchange shall be based on the average amount of the closing market price of the Korea Stock Exchange ( regardless of whether there is a transaction record) every two months before and after the base date of appraisal. The return to the instant case, health stand, and the Defendant assessed FF stocks, which are listed stocks, as the average amount of the closing market price of the Korea Stock Exchange every day, published every two months after the base date of appraisal before and after the base date of appraisal, and the Plaintiff’s above assertion, which differs from the premise, is without merit.

(3) As to the cost of interest on the provisional payment

(A) In calculating the net asset value of unlisted stocks, which are donated property, according to the supplementary valuation method, a debt that is deducted from the asset value means a debt that the relevant company, at the time of the calculation, should have ultimately borne and performed (see, e.g., Supreme Court Decision 2002Du12458, May 13, 2003).

(B) According to the above facts, the Plaintiff loaned money to the non-party company that was the deficit corporation without compensation. However, there is no evidence to prove that the Plaintiff and the non-party company agreed on the repayment period of the loan and the payment of interest, and that “the secondBB has the obligation to pay interest to the Plaintiff by free lending,” and that “the non-party company has the obligation to pay interest to the Plaintiff” is an issue of another point of view, and it is unclear that “the non-party company has the obligation to pay interest to the Plaintiff as of the base date of appraisal,” and that it does not constitute a deduction from the asset value, and the Plaintiff’s above assertion is without merit.

(4) As to the allowance for bad debts

(A) According to Article 17-2 subparag. 4 (a) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 223, Jul. 26, 201; hereinafter the same), the allowances for bad debts as of the evaluation base date shall be calculated by subtracting them from liabilities, and the allowances for bad debts as of the evaluation base date shall not be deducted. The purpose of the above provision is that "the allowances for bad debts determined as of the evaluation base date of the allowances for bad debts as of the evaluation base date" is that the allowances for bad debts are obviously irrecoverable and bad debts have occurred, and it is reasonable to evaluate the allowances for bad debts to be excluded from assets, as long as it is objectively apparent that it is impossible to recover them from the perspective of assetability. In light of this purpose, the meaning of "the allowances for bad debts as of the evaluation base date of the sales claims" is a sales claim in a state that can be evaluated to the extent that they cannot be recovered from the perspective of assetability, and thus, the allowances for bad debts at the present stage of losses can be confirmed.

(B) The Plaintiff’s assertion is without merit, since there are no data to ascertain the basis of calculation of the allowance for bad debts as asserted by the Plaintiff, the possibility of loss from sales, and the possibility of recovery.

(5) As to the depreciation reserve

(A) The amount paid for the purchase of fixed assets for accounting purposes is the advance payment of expenses that may not be incurred over the period of use of the assets. Accordingly, in order for an enterprise to cost part of the acquisition cost of fixed assets each time of settlement of accounts in an appropriate manner, these calculation processes are depreciation. The amount of depreciation of intangible fixed assets is the same context as the portion of the ordinary cost, that is, when using the direct method that deducts the depreciation amount from the book value at that time, and when it redeems the tangible fixed assets, the acquisition price shall be accumulated separately by creating a separate account. This account is the depreciation reserve account and the amount appropriated therein is the depreciation reserve account, and the depreciation reserve shall be added to the liabilities. Accordingly, the depreciation reserve shall be deemed to have been determined as the cost as of the evaluation base date, and it shall be added to the liabilities. Article 55(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that “The book value of the corporate assets is the amount calculated by subtracting the depreciation

(B) As seen earlier, the amount of depreciation on the balance sheet after return to the instant case and the family settlement balance sheet was set as the same as the amount of depreciation on the balance sheet on December 31, 2004, the nextBB, a shareholder of the non-party company, submitted the provisional settlement balance sheet in the lawsuit claiming the revocation of gift tax, and the amount of depreciation on the balance sheet on December 31, 2005, reflects the part concerning the officetels purchased on July 1, 2005. Therefore, it is inappropriate to reflect the amount of depreciation on the family settlement balance sheet (if an officetel is reflected in the calculation of the amount of depreciation, and the amount of depreciation on the family settlement balance sheet should be added to the assets, and the amount of depreciation on the family balance sheet is justifiable, and the plaintiff's above assertion is not reasonable.

3. Conclusion

If so, the plaintiff's claim is without merit, it is dismissed, and it is so decided as per Disposition.