early 2010 Heavy2750 ( October 10, 2011)

The stock value assessed by an accounting corporation shall not be deemed to reflect objective exchange value.

The stock evaluation of an accounting firm shall not be regarded as a value reflecting objective exchange values in light of the fact that the accounting firm conducted a short-term evaluation on the basis of the estimated financial data and the results of the interview with a person in charge, and that there was no fact that it conducted a review on the authenticity of submitted data, etc., sales, etc.

2012Guhap4111 The imposition disposition of capital gains tax, etc.

XX

Head of the High Tax Office

October 9, 2012

November 27, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of capital gains tax of 000 won as of February 16, 2010 and securities transaction tax of 000 won as of February 23, 2010 against the Plaintiff shall be revoked 1).

1. Details of the disposition;

A. The Plaintiff owned 90,00 shares of XX (hereinafter referred to as the “instant shares”) of the non-listed corporation, a representative director, who was in office.

B. O Co., Ltd., a KOSDAQ-listed corporation, entered into an all-inclusive share swap contract with O on May 26, 2006, with the content that the shares are collectively exchanged with Y, and that the O is a complete parent company and a complete subsidiary. In entering into the above exchange contract, OO and XX shall request AA Accounting Corporation (hereinafter referred to as “instant accounting corporation”) to assess the shares issued in XX as KRW 00 per share and assess the sales value of the OO shares as KRW 00 per share on the basis of the transaction value of the KOSDAQ market, and agree that the OO shares shall be exchanged at KRW 11.57013 per share.

C. On August 18, 2006 according to the above share swap contract, O became a complete parent company in XX. The P becomes an O’s complete subsidiary, and during that process, the Plaintiff’s instant shares owned by the Plaintiff were transferred to O. The Plaintiff acquired 1,041,312 shares of O’s shares of O issuance (hereinafter “O’s shares”). However, the Plaintiff did not report capital gains tax and securities transaction tax.

D. The Defendant: (a) deemed that the exchange value of the instant shares voluntarily assessed by an outside appraisal organization cannot be deemed to be the value reflecting the objective exchange value; (b) based on the supplementary assessment method under Article 63 Subparag. 1 (c) of the Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006); and (c) calculated the value of the instant shares as KRW 00 per share; and (c) imposed upon the Plaintiff each of the instant dispositions (hereinafter referred to as “each of the instant dispositions”).

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on August 2, 2010, but the said appeal was dismissed on October 10, 201.

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

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

The plaintiff asserts that each of the dispositions of this case by the defendant is unlawful for the following reasons, and thus, it should be revoked.

(1) In principle, the transfer value of assets under the Income Tax Act shall be the actual transaction value between the transferor and the transferee at the time of transfer of the pertinent assets. Since the Plaintiff exchanged stocks through an adequate appraisal of the stock value of the pertinent accounting firm, an outside appraisal organization, it constitutes the normal market value reflecting the objective exchange value, and the Plaintiff, who exchanged the instant O stocks with the same value, did not ultimately have any profit from property due to the instant stock exchange. Nevertheless, the Defendant applied the supplementary appraisal method differently to each of the instant dispositions.

(2) Since the Plaintiff acquired the instant O stocks exchanged with the instant stocks after the lapse of two years of the period of protection deposit, the time of transfer of the instant stocks shall be deemed to have passed after the expiration of the period of protection deposit. However, the Defendant considered the date of stock exchange as the date of transfer and disposed of each of the instant stocks.

B. Relevant statutes

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

C. Determination

(1) As to the Plaintiff’s first argument

According to Articles 94 (1) 3 (c) and 96 (2) of the Income Tax Act (amended by Act No. 7873 of March 3, 2006; hereinafter the same), when calculating the transfer income tax accruing from the transfer of stocks not listed in the Exchange, the transfer value shall be based on the actual transaction value as at the time of transfer. According to Article 114 (5) of the Income Tax Act and Article 176-2 (1) 1 and (3) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19687 of September 22, 2006; hereinafter the same shall apply), even if the transfer value is determined based on the actual transaction value, even if there are no books, sales contract, receipts or other documents necessary to confirm the actual transaction value at the time of transfer, or if it is impossible to recognize or confirm the actual transaction value at the time of transfer or acquisition due to lack of important parts, the transfer value may be determined or corrected by means of estimated investigation.

In light of the following circumstances, which are acknowledged by comprehensively considering the health stand, the aforementioned evidence and the purport of the entire pleadings, the pertinent accounting firm’s stock value assessment cannot be deemed as a reflection price reflecting objective exchange values. For this reason, it does not seem to have any illegality in calculating the instant transfer income tax and securities transaction tax by evaluating the value of the instant stock as KRW 000 per share according to complementary assessment methods. Accordingly, the Plaintiff’s assertion on a different premise is without merit.

(A) The accounting firm of the instant case, while evaluating the stock value of the instant case, was assessed in a short period on the basis of only estimated financial data produced at will by XX and the result of interview with the person in charge of XX, and the fact that the accounting firm conducted a review of the authenticity of the submitted data, etc. is not found otherwise.

(B) The instant accounting corporation’s sales from January 2006 to March 2, 2006, prior to the instant stock value assessment, amounted to KRW 000 per monthly average of KRW 000. However, the instant accounting corporation estimated that the total sales from XX 2006 to KRW 00 (monthly average of KRW 000) were equal to KRW 8 times when the instant stock value assessment was conducted, and excessively appropriated sales and total profits.

(C) When evaluating the stock value of this case, the accounting firm of this case viewed the presumption interest in XX as KRW 000 in 2006 and KRW 000 in 2007. However, actual loss of 2006 and 2007 incurred loss of the XX won in 2006.

(D) The accounting firm of this case calculated the exchange rate based on 000 won at a discount of 9% without any specific grounds, even though it calculated the exchange rate of 00 won per share of the stock value assessment of this case as an average of 000 won per share of the asset value of this case, and 000 won of the profit value per share of this case.

(2) As to the second argument of the Plaintiff

In order to prevent investors from selling shares, etc. for a certain period of time after acquiring the shares, the transfer time of the shares is merely August 18, 2006, which is the date of the exchange of the shares of this case and the date of the transfer of the shares of this case, and there is no relation with the period of the transfer of the shares of this case (the circumstance that the Plaintiff was unable to sell shares of this case acquired through a share swap contract does not affect the calculation of the transfer income of the shares of this case). Accordingly, the Plaintiff’s assertion on a different premise is without merit.

3. Conclusion

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