[1] In the case of deemed donation following the renunciation of preemptive rights, whether gift tax cannot be levied if the name of shares is changed in the name of the shareholder who renounced the preemptive rights

[2] Whether it is reasonable to apply the "standards for the analysis of securities" under the "Regulations on the Acquisition of Securities and Exchange Services" to the assessment of stocks of a corporation less than three years after the commencement of the business

[3] The case holding that it is reasonable to apply a supplementary evaluation method as it is difficult to calculate the market price

[4] Criteria for determining the commencement of business at the time of assessing unlisted stocks according to supplementary evaluation methods

[1] Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990) and Article 41-3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 13196 of Dec. 31, 1990) provide that where part of shareholders waive their preemptive rights and are allocated more than new shares by other shareholders, profits therefrom shall be regarded as donation. Thus, even if the title of the shares allocated more than the new shares is changed to the name of shareholders who renounced their preemptive rights after the donation is deemed to have been made pursuant to the above provision, the profits derived from the excess allocation of the new shares shall not be retroactively extinguished. Thus, even in this case, the gift tax shall be imposed even if the above interpretation is more unfavorable than the donation, and thus, it shall not be deemed contrary to the principle of tax equality or the principle of substantial taxation.

[2] The "standards for the analysis of securities", which is used as the basis for the appraisal of the market price of stocks, is a provision regarding the appraisal of stocks at the time of the company disclosure or increase in the capital of a corporation which has been engaged in business activities for not less than five years after its establishment and has made efforts to distribute dividends. Thus, the application of the appraisal of stocks of a corporation less than three years after the commencement of the business would rather be insufficient to reflect the actual market price of stocks. Therefore, it is difficult to view that the appraisal of stocks according to the above

[3] In cases where there is no appraisal value assessed in an objective and reasonable manner other than the appraisal result to be rejected because there is no example of sale among unspecified persons for shares of the company, and there is no appraisal value assessed in an objective and reasonable manner, it shall be deemed that it is difficult to compute the market price of the donated property. Therefore, it is reasonable to evaluate the donated property in accordance with the supplementary appraisal method under Article 5 (5) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 190).

[4] The commencement of business under the proviso of Article 5 (5) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 1990) does not formally determine the commencement of business on the basis of the registration date of business, etc., but it is reasonable to substantially determine the commencement of business on the basis of the time when the preparation of the business is completed and the preparation of the business becomes in a state where the business is performed or is able to perform the original business purpose. Thus, it is reasonable to determine the commencement of business before or after the commencement of the business.

[1] Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990); Article 41-3 of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 1990) / [2] Article 9 (1) of the former Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990); Article 5 (5) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 1990) / [3] Article 5 (5) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196, Dec. 31, 1990) / [4] Article 15 (1) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 15165, Dec. 16, 1965, 196

[2] Supreme Court Decision 93Nu18891 delivered on December 10, 1993 (Gong1994Sang, 392) / [3] Supreme Court Decision 95Nu23 delivered on June 13, 1995 (Gong195Ha, 2423)

Plaintiff 1 and three others (Attorneys Yoon Young-chul et al., Counsel for the plaintiff-appellant)

The Director of the National Tax Service

Seoul High Court Decision 92Gu23331 delivered on November 17, 1994

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. On the first ground for appeal

According to the reasoning of the judgment below, when the non-party company issued new shares more than four times from October 17, 1989 to November 6, 199, the court below rejected part of the shareholders at the time of the issuance of new shares, including the plaintiffs, and cultivated the preemptive rights so that the plaintiffs exceeded the preemptive rights, and thereby, obtained excess allocation of the preemptive rights. The defendant's above excess allocation of new shares is not justified in the misapprehension of the legal principles as to the issuance of new shares under the name of the non-party company's management and the issuance of shares to the non-party company under the name of the non-party company's company, which is deemed to be a donation under the provisions of Article 41-3 of the Inheritance Tax Act (amended by Presidential Decree No. 4283 of Dec. 31, 1990; hereinafter the same shall apply) and Article 41-3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 13196 of Dec. 31, 199).

2. On the second ground for appeal

Article 34-4 of the Inheritance Tax Act and Article 41-3 of the Enforcement Decree of the same Act provide that if a part of a shareholder renounces his/her preemptive right to new stocks and is allocated in excess of the new stocks by other shareholders, profits therefrom shall be deemed donation. Even if the name of the shares allocated in excess is changed in the name of the shareholder who renounced his/her preemptive right to new stocks after the donation is deemed to have been made pursuant to the above provision, so even in this case, the profits acquired by the excess allocation of preemptive right shall not be retroactively extinguished, so even in this case, the gift tax shall be imposed. Such interpretation is more unfavorable than in the case of donation, and thus

The court below erred in holding that the date when the plaintiffs changed their names according to the ratio in the absence of the waiver of preemptive rights is the date on which the court rendered a decision to confirm the shareholders' rights following the above change, but the decision that the gift tax liability of this case is not extinguished merely by the above change of the name of shares is reasonable. Therefore, the argument is without merit.

3. On the third ground for appeal

The "Standards for securities analysis" of the non-party Korea Securities Company which has appraised the market price of stocks of the non-party company according to the order of appraisal by the court below is a provision on stock appraisal at the time of the company's disclosure or capital increase, which has been engaged in business activities for not less than five years after its establishment and has made efforts to distribute dividends. Thus, in applying the stock appraisal of less than three years after the commencement of the business, it would result in a lack of reflection of the actual market price of stocks, and thus, it is difficult to view the appraisal of stocks in accordance with the above standards as an appropriate market price which reflects the objective exchange value of stocks appropriately. Thus, it was erroneous in the court below's rejection of the appraisal that the above appraisal value was lower than the market price due to the unique characteristics of the purpose or method of appraisal as above, but it is reasonable to regard the appraisal result of the non-party company's stock appraisal which was less than three years after the commencement of the business as the market price of this case. The court below did not have to point out a specific method in ordering the appraisal or order not to adopt the appraisal result.

Therefore, it is reasonable to evaluate donated property in accordance with the supplementary evaluation method under Article 5 (5) 1 (b) of the Enforcement Decree of the Inheritance Tax Act, since there is no example of sale among unspecified persons for the shares of the non-party company, and there is no appraisal value assessed in an objective and reasonable manner other than the appraisal result in the original decision to be rejected as seen above, and there is no appraisal value assessed in addition to the appraisal result in the original decision that should be rejected. Therefore, it is reasonable to evaluate donated property in accordance with the supplementary evaluation method under Article 5 (5) 1 (b) of the Enforcement Decree of the Inheritance Tax Act. For the same purport, it is reasonable that the lower court has determined that there is no illegality in evaluating the shares of the non

All arguments are without merit.

4. On the fourth ground for appeal

The method of evaluating supplementary valuation under the Enforcement Decree of the Inheritance Tax Act is to reflect the actual market price as seen earlier, so it cannot be deemed to violate the provisions of Article 9(1) of the Inheritance Tax Act, which provides that the value of the donated property shall be assessed according to the market price under the proviso of Article 5(5)1(b) of the Enforcement Decree of the Inheritance Tax Act, which provides that the method of evaluating shares shall be more appropriately. In addition, the date of starting the business at this time shall not be determined formally on the basis of the date of registration of the establishment or the date of registration of the business, but it shall be reasonable to make a substantial determination on the basis of the time when the preparation of the business is completed and the preparation of the business is conducted or is able to perform its original business. According to the records, since the construction of the non-party company whose business purpose is the automobile mooring, etc. is to be completed on October 13, 1989, the non-party company's business was commenced before and after this time, and thus, the court below's decision was not accepted.

In addition, the theory of lawsuit is that the officially assessed individual land price for the land owned by the non-party company is illegal, but this is a new argument that is not at the court below and not a legitimate ground of appeal, and even in such a case, the court below is not obligated to ex officio to examine whether the land is illegal or to make an explanation.

All arguments are without merit.

5. 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 Lee Yong-hun (Presiding Justice)