[1] Whether the provisions concerning the market price of the inherited property under each subparagraph of Article 49(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act are examples (affirmative)

[2] In the case of listed stocks, whether the average market price at the Korea Exchange published every two months before and after the date of transfer calculated according to the method of appraisal as stipulated in Article 63(1)1(a) of the former Inheritance Tax and Gift Tax Act is considered as the market price (affirmative in principle)

[1] Article 101(1) of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009); Article 167(3)1 and (5) of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 23588, Feb. 2, 2012); Article 7(1)2(a) of the Securities Transaction Tax Act; Article 13(1)2, Article 35(1)1, and Article 60(2) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 9916, Jan. 1, 2010); Article 49(1)1 and (6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 2042, Feb. 18, 2010); Article 167(1)6(1)2(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act / [Article 106(1) of the former Act

[1] Supreme Court Decision 2008Du6448 Decided January 14, 2010 / [2] Supreme Court Decision 2010Du4421 Decided January 27, 2011

Plaintiff 1 and two others (Law Firm LLC, Attorneys So-young et al., Counsel for the plaintiff-appellant)

The Director of the Pacific District Office

Seoul High Court Decision 2012Nu39843 decided June 7, 2013

All appeals are dismissed. The costs of appeal are assessed against each appellant.

The grounds of appeal are examined.

1. As to the defendant's appeal

A. Article 101(1) of the former Income Tax Act (amended by Presidential Decree No. 9897, Dec. 31, 2009); Article 167(3)1 and (5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 23588, Feb. 2, 2012) provide that the transfer of an asset at a price lower than its market price shall be deemed unreasonably reduced if the asset is transferred to the related party at a price lower than its market price; Article 7(1)2(a) of the Securities Transaction Tax Act provides that the amount of transfer income shall be calculated based on the market price appraised by applying mutatis mutandis the provisions of Articles 60 through 64 of the Inheritance Tax and Gift Tax Act, regardless of such act or calculation; Article 101 of the former Income Tax Act provides that the amount of transfer income shall be calculated based on the market price appraised by the heir to a person who received the inherited asset at a price lower than its market price; Article 15(1)2(1)5) of the former Inheritance Tax and Gift Tax Act (amended by Act No.

Meanwhile, Article 60(1) main text of the Inheritance Tax and Gift Tax Act provides that “The value of property on which inheritance tax or gift tax is levied shall be the market value as of the date of commencing the inheritance or donation (hereinafter “date of appraisal”), and Article 60(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that “the market value shall be the normal price established in the event of free trade between many and unspecified persons, and shall include the amount recognized as the market value under the conditions as prescribed by the Presidential Decree, such as the expropriation, public sale price, and appraisal price,” and Article 49(1) main text of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”) refers to “the market value recognized as the market value under the conditions as prescribed by the Presidential Decree, such as the expropriation, public sale price, appraisal price, or public sale price, etc.” under Article 60(2) of the Act.

As above, Article 60(1) of the Inheritance and Gift Tax Act declares the principle of market value in the evaluation of inherited or donated property under paragraph (1). Article 60(2) of the same Act provides for a broad standard that the market value is formed through a general and normal transaction, which can be recognized as the market value on the premise that the objective exchange value should be adequately reflected, and delegates specific scope to Presidential Decree. Thus, the provision of transaction value, etc. as to the “relevant property” subject to taxation under each subparagraph of Article 49(1) of the Enforcement Decree of the former Inheritance and Gift Tax Act, which is delegated, includes a representative case in which the market value can be seen as the market value of inherited or donated property (see, e.g., Supreme Court Decision 2008Du6448, Jan. 14, 2010).

B. citing the reasoning of the judgment of the court of first instance, the court below acknowledged the following facts: ① on May 19, 2009, the deceased non-party transferred 18,000 shares of overseas vessels (hereinafter “overseas vessels”) which are non-listed corporations, and 21,630 shares of KELSM Co., Ltd. (hereinafter “EM”) to 7,50 won per share and reported and paid capital gains tax and securities transaction tax; ② the Plaintiffs were the non-party’ heir of the non-party who died on June 21, 2009; ③ The Defendant, based on the supplementary evaluation method under the Inheritance Tax and Gift Tax Act, deemed the transfer price of overseas vessels shares to be 186,244 won per share, MM shares to be 384,84, and 386 won per share, the transfer price of the non-party shares to the non-party, the transfer price of the non-party shares to the non-party, the transfer price of the non-party shares.

Furthermore, the lower court determined that: (a) there was no significant change in the trading price per stock of overseas vessels transacted since 2005 to KRW 15,625 to KRW 20,000; (b) since May 10, 2007, the trading price per stock of EM stocks was set at KRW 20,000, and the trading price per stock traded since several times since 2005 to KRW 15,000, except for once; (c) there was no special change in the sales or operating profit, which is the growth and profitability index since 2006; and (c) there was no special reason to affect the increase in the stock price in the future; and (d) there was no reasonable difference in the trading price of the stocks issued by the Tax Tribunal in the appeal filed on the grounds that the stocks were disposed of at low price of the instant non-listed stocks; and (e) there was an objective transaction example that the stocks were disposed of at least KRW 10,00,000,000 in the stocks issued on October 26.

C. In light of the relevant provisions, legal principles, and records, the fact-finding and determination by the court below are just, and there is no error of misapprehending the legal principles on transaction example included in the market price under Article 60(2) of the Inheritance and Gift Tax Act and Article 49(1)1 of the Enforcement Decree of the Inheritance and Gift Tax Act.

2. Regarding the plaintiffs' appeal

A. As to adding up the value of inherited property to the value of shipping stocks for a stock company

(1) Article 60(1) of the Inheritance and Gift Tax Act provides that “The value of property on which inheritance tax or gift tax is levied under this Act shall be the market price as of the date of commencing the inheritance or the date of donation (hereinafter “date of appraisal”). In this case, the value assessed by the method of appraisal stipulated in Article 63(1)1(a) and (b) (excluding cases falling under the provisions of Article 63(2)) shall be deemed as the market price.” The main sentence of Article 63(1)1(a) of the Inheritance and Gift Tax Act provides that “The average amount of the closing price (not based on any transaction record) of the Korea Exchange published every two months after the date of appraisal on the securities market shall not be determined as the market price” with respect to the method of appraisal of stocks of a stock-listed corporation traded

The legislative purport of Article 60(1)1(a) of the Inheritance and Gift Tax Act, newly established at the time of the wholly amended amendment by Act No. 5193 of December 30, 1996, which provides that the market price principle shall apply to the appraisal of listed stocks in principle, but the value assessed by the supplementary evaluation method stipulated in Article 63(1)1(a) shall be deemed as the market price in order to exclude the arbitraryness of assessment and to ensure objectivity, and the following provisions shall be comprehensively taken into account: (a) the provisions of Articles 60 and 63(1)1(a) of the Inheritance and Gift Tax Act concerning the evaluation method of listed stocks shall be deemed as the market price; and (b) the listed stocks as stipulated in Article 63(1)1(a) of the Inheritance and Gift Tax Act shall, under the latter part of Article 60(1) of the Inheritance and Gift Tax Act, be deemed as the market price on each day before and after the date of transfer calculated according to the evaluation method stipulated in Article 63(1)1(a).

(2) In the same purport, the court below rejected the plaintiffs' assertion that the transfer value of the listed stocks of this case transferred over November 11, 2009 and on November 12, 2009 should be 229,380,034 won, and that the part of the disposition of this case relating to the market value of 5,000 shares of the Korea Shipping Co., Ltd. (hereinafter "the listed stocks of this case") inherited from the deceased Nonparty should be 340,150,000 won calculated in accordance with the latter part of Article 60(1) of the Inheritance and Gift Tax Act and Article 63(1)1(a) of the Inheritance and Gift Tax Act. The court below rejected the plaintiffs' assertion that the transfer value of the listed stocks of this case transferred over November 11, 2009 and the market value of this case should be 229,380,034 won, and it is justifiable. In so doing, the court below did not err by misapprehending the legal principles on the method of evaluation.

B. As to the addition of the value of the inherited property of the distribution profit to Croccoa City

The court of final appeal may investigate and determine only to the extent of filing an appeal based on the grounds of final appeal. As such, the grounds of final appeal should specify the grounds of final appeal and explain specific and explicit reasons as to which part of the judgment below violated the statutes (see, e.g., Supreme Court Decision 2011Du26015, Feb. 23, 2012).

However, the petition of appeal filed by the Plaintiffs did not state in the grounds of appeal as to the addition of the inherited property value of Cico Cico City in the disposition of this case. The appellate brief did not state specific and explicit grounds as to which part of the judgment below in relation to it was in violation of the law. Therefore, it cannot be deemed that the grounds of appeal was lawful.

3. Conclusion

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

Justices Park Poe-young (Presiding Justice)