Whether the amount of the company's debt should be deducted from the stock transfer price, and in the case of capital gains, the point of determining the impossibility of collecting the claim

Although the company's obligation is responsible for and repaid with the transfer price of shares, this is merely deemed to have been set against the employee of the transfer price of shares, and cannot be deemed to have deducted the company's obligation from the transfer price of shares. The point of time of determining the impossibility of recovering the transfer price of shares shall be deemed to be the standard

Article 96 of the Income Tax Act, Article 97 of the Income Tax Act

2017Gudan63323 Disposition of revoking capital gains tax

EK

○ Head of tax office

November 22, 2017

January 17, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 538,580,020 (including additional tax) for the Plaintiff on January 11, 2016 shall be revoked.

1. Details of the disposition;

A. On July 23, 2012, while the Plaintiff owned 225,00 shares (hereinafter referred to as “instant shares”) of OrkK Co., Ltd. (hereinafter referred to as the “instant company”), the Plaintiff transferred the instant shares to B on July 23, 2012, but the transfer income tax following the transfer of the instant shares did not have been reported and paid.

B. On October 5, 2015 to October 24, 2015, the Defendant issued a disposition imposing capital gains tax of KRW 5 billion (including additional tax, and acquisition value of KRW 1.5 billion) on the Plaintiff on January 11, 2016 (hereinafter “instant disposition”) according to the result of the investigation of capital gains tax on the Plaintiff conducted by the director of ○○ Regional Tax Office from October 5, 2015 to October 24, 2015.

C. On March 4, 2016, the Plaintiff dissatisfied with the instant disposition, filed an objection with the Director of the Regional Tax Office on March 4, 2016, and received a decision of dismissal on March 17, 2016, and filed a request for a trial with the Tax Tribunal on July 14, 2016, and received a decision of dismissal on April 4, 2017.

[Ground of recognition] No dispute, Gap evidence Nos. 1, 3, 4, 8, and Eul evidence No. 1 and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) First, the shareholders and directors of the instant company, including the Plaintiff, shall transfer the entire business promoted by the instant company to the B, etc., and the Plaintiff first transferred the instant shares to the B by way of allowing the B to succeed to the major shareholders and representative directors of the instant company. The Plaintiff agreed to pay KRW 2,344,691,58 of the instant company’s debt incurred while executing the instant company’s business until the time when concluding the share transfer agreement with the B. As such, the transfer value of the instant shares should be deemed KRW 2,65,308,412, which is calculated by deducting the equivalent amount from KRW 5 billion stated in the transfer agreement.

2) Second, even if not, the Plaintiff did not receive the transfer price of the instant shares from the BB, and thereafter, leap○○○, the creditor of the Plaintiff and the instant company, repaid KRW 2,172,328,076 on the basis of the right to collateral security established in the name of the Plaintiff in the name of the Plaintiff, which was the creditor of the instant company, but the remaining claim for the transfer price was impossible to recover when considering the financial situation, payment ability, etc. of the BB, and there was no possibility of realizing the future income. Therefore, the transfer price of the instant shares should be deemed KRW 2,172,328,076, which can be deemed to have been actually paid by the Plaintiff.

Therefore, the instant disposition on a different premise ought to be deemed to be partially unlawful.

(The plaintiff is seeking to revoke the entire disposition of this case).

(b) Fact of recognition;

1) As of July 23, 2012, the Plaintiff held 45% of the total issued shares of the instant company, 40% of the △△△△△△, and 15% of the △△△△△△. The representative director of the instant company was the Plaintiff, Kim○, and the auditor of the instant company.

2) On July 23, 2012, the △△△△, Kim ○, and this △△△△, including the Plaintiff, decided to transfer the instant company and the instant company’s low temperature logistics center construction business (hereinafter “instant business”) to the △△△△ and the instant company for KRW 8 billion. The meeting minutes of the board of directors (Evidence 6) and the “Agreement on the State of a Juristic Person” (Evidence 7), which appear to have been prepared at the time, include the following (in its original text; hereinafter the same shall apply).

- The 200 billion won remaining 55% of the shares will be transferred to the transferee at the time of ESCRW not later than August 10, 2012 to this B, at the time of the conclusion of the stock transfer contract, to this 5 billion won in real estate owned by this B, at the same time as the contract for stock transfer.

- The amount of debt incurred as a corporation from the acquisition of the corporation in February 2010 to May 2012, because it has been secured with the share transfer price of the person who is a major shareholder, the president of KR who is a major shareholder will be responsible and settled.

* Separate: the current status of corporate debts and outstanding amounts ( October 20, 2012 - January 31, 2012)

3) On July 23, 2012, the Plaintiff entered into a share transfer contract with thisB, and the “Agreement on Acquisition of Stocks” (Evidence 8) and “Annexed Agreement” (Evidence 9) that appears to have been prepared at the time include the following:

“A”: The name of the assignee of KK and B: B.

Article 4 (Payment of Sale Price)

(1) "B" shall pay the amount of five billion won (22,222/1 share) in the purchase price on the date of this contract to "A": Provided, That "B" may establish a collateral security of five billion won in the amount of five billion won in the purchase price to "B" on the land owned by "B" as the creditor of "A", in lieu of the payment of the purchase price.

(2) "B" shall be paid 5 billion won to "A" until August 10, 2012, and "A" shall terminate the collateral security under paragraph (1) of this Article.

Article 5 (Delivery and Transfer of Stock Certificates)

(1) The term "company" shall be deemed not to have issued share certificates as of the date of this contract, and therefore "B" shall be deemed to have fulfilled the obligation to create a right to collateral in accordance with Article 4 of the "this Agreement" and the share certificates

4. "B" shall secure at least 80 billion won in cash with the funds required to promote a project by August 14, 2012;

5. Where "B" has completed the implementation referred to in paragraph (4), "A" shall be liable to perform the following:

(d) "A" is responsible for and settled obligations incurred to "A" from February 2012 to May 2012.

6. Where "B" fails to complete the implementation referred to in paragraph (4) within the deadline, the relationship between "A" and "B" shall be as follows:

A) The term "B" shall receive the proceeds by exercising the right to collateral security provided by "B" to "A" as the purchase price of shares, and the term "B" shall not raise an objection.

(B) The obligation to implement the subparagraphs of paragraph 5 shall be extinguished.

4) On July 24, 2012, the Plaintiff obtained from thisB the registration of creation of a neighboring mortgage with a maximum debt amount of KRW 5 billion with respect to real estate (hereinafter “instant real estate”) such as ○○○○-dong 43-2 land, etc. owned by thisB, and around that time, the Plaintiff completed the transfer of ownership to the instant stocks to thisB.

5) Meanwhile, leap○○ has lent funds to the Plaintiff and the instant company. As of July 23, 2012, 2012, loans extended to the Plaintiff amounting to KRW 1 billion, and loans extended to the instant company amounting to KRW 1.3 billion, and KRW 1.37 billion.7 billion.

6) On July 23, 2012, the Plaintiff transferred KRW 2.4 billion out of the Plaintiff’s share transfer price claim against BB against the Plaintiff.

7) B had not paid KRW 5 billion to the Plaintiff until August 10, 2012, and had not secured KRW 80 billion in cash until August 14, 2012.

8) On August 24, 2012, leap○○ received a seizure and collection order (Seoul ○○ District Court 2012 *****) on the secured debt of the Plaintiff’s right to collateral security (Seoul ○○○ District Court 2012 ***) on the other hand, on April 1, 2016, establishing a pledge right on the right to collateral security under the name of the Plaintiff with the claim of KRW 3.85 million against the Plaintiff, and on September 8, 2016 and August 10, 2017, each voluntary auction procedure (○○ ○○○ branch *2013 *2*20 *) on the instant real estate (○○○ branch * the same court 2013 ** 1*1 *), as a creditor or pledgee of the right to collateral security under the name of the Plaintiff.

9) Meanwhile, on March 29, 2013, this B filed a lawsuit seeking the cancellation, etc. of the registration of the right to collateral security under the Plaintiff’s name (○○ District Court 2013 Gohap********) by asserting that the act of entering into the instant share transfer contract with the Plaintiff and leap○○○○ was null and void as it is an act of undue interest under Article 104 of the Civil Act. On February 17, 2014, this B filed a lawsuit seeking the cancellation, etc. of the registration of the right to collateral security under the Plaintiff’s name (○○ District Court ○○○○○○ Branch 2013 Gohap*****). The Plaintiff shall be paid KRW 3.5 billion to the Plaintiff by March 5, 2014, but if not paid, an agreement was reached to the effect that five billion

10) On June 27, 2017, ○○ filed an application for property specification with respect to BB (○○ District Court ○○○○○○○ Branch 2017Ka Names5***). This BB submitted a list of property to the court that there is no property.

11) AB was prosecuted for committing a crime, such as having a construction company construct a commercial building on the land ○○○○-dong and 43-4 and three parcels of land without the intent or ability to pay the construction cost from March 15, 2014 to July 2014, and was convicted of two years of imprisonment (○ High Court 2016No*****) on July 12, 2017, and was convicted of two years of conviction (the name of a crime recognized). At present, the sentence is in accordance with the execution of final and conclusive judgment.

[Reasons for Recognition] No dispute exists, Gap evidence Nos. 6 through 17, Gap evidence Nos. 25 through 27, Eul evidence No. 2 (including paper numbers), the witness Kim ○'s partial testimony and the purport of the whole pleadings

C. Judgment on the Plaintiff’s assertion

1) Determination on the first argument

A) In full view of the following circumstances acknowledged in light of the evidence and facts as seen earlier and the purport of the entire pleadings, it is reasonable to view the transfer price of the instant shares as KRW 5 billion.

○ The directors and shareholders of the instant company, including the Plaintiff, agreed to transfer the instant company and business in KRW 8 billion to the B, and the B had to obtain a loan from the financial right for continuing the instant business and for the payment of KRW 8 billion of the transfer proceeds of the instant company and business. If the B fails to raise funds, it was impossible to take over the instant company and business.

The Plaintiff, however, determined that the transfer of the instant shares is effective by allowing the BB to secure 80 billion won or more in cash until August 14, 2012, while setting the due date for the payment of the purchase price of the instant shares, which was August 10, 2012. If the BB secures cash, the Plaintiff would be responsible for and settle the instant company’s liabilities since the transfer of the instant company and the instant business would be possible. However, even if it is not so, the Plaintiff’s execution of the right to collateral security under the name of the Plaintiff and exemption from the Plaintiff’s obligation to settle the instant company’s obligations at the same time. Ultimately, the Plaintiff appears to have expressed the intent to transfer the instant company and the instant business regardless of the transfer of the instant company and the instant business, even if the conditions were fulfilled on the condition of securing the capital of the BB, and the Plaintiff appears to have concluded the instant agreement with the creditor of the instant company without consultation with the Plaintiff on May 20, 2012.

○ In the end, although B failed to secure cash, the instant shares were already transferred to B and transferred to her transfer. Even after the Plaintiff, the Plaintiff did not assert the validity of the transfer of the instant shares, and the Plaintiff did not impose any obligation on the instant company to settle obligations with respect to the instant company. Furthermore, although the Plaintiff did not exercise the right to collateral security, le○○○○ who acquired the instant claim for the transfer of shares from her transferee was distributed a voluntary auction procedure for the instant real estate by means of seizure and collection order, etc. for the secured obligation of collateral security.

○ At the same time, the Plaintiff agreed to reduce the transfer price and withdraw the lawsuit on the premise that the transfer price is five billion won.

○ The Plaintiff decided to pay the instant company’s debt with the purchase price of the instant shares between the director and the shareholders of the instant company. However, this merely appears to have been set upon the Plaintiff after receiving the purchase price of the instant shares from the BB, and thus, it cannot be deemed that the transfer price of the instant shares is not KRW 5 billion solely on such circumstance.

○ Although the transfer price of the instant shares was KRW 5 billion and the transfer price of the shares of the other shareholders was KRW 3 billion, the sales price per share of the instant shares would have significantly exceeded the sales price per share of the other shareholders. However, the Plaintiff appears to have led the instant business by taking into account not only the major shareholders of the instant company but also the fact that the Plaintiff was responsible for and raising funds from ○○, etc. to promote the instant business, and that the transfer of the instant business and the instant company was not calculated on the basis of the stock price from the beginning. Furthermore, the reason why the instant shares were first acquired by B was to raise funds worth KRW 80 billion by securing the status of the major shareholders and representative directors of the instant company, it cannot be concluded that the transfer price of the instant shares was not KRW 5 billion on such sole basis.

B) Therefore, we cannot accept this part of the Plaintiff’s assertion on a different premise.

2) Judgment on the second argument

A) The Income Tax Act adopts the so-called principle of confirmation of the right to taxable income, deeming that the right that is the cause of income has been realized when there is no income in reality, and adopts the so-called principle of determination of the right to taxable income. However, even if a claim that is the cause of income has occurred, if it is objectively apparent that the claim that is the cause of income subject to income becomes impossible to recover due to the debtor’s bankruptcy, etc. and that the future income is no possibility of realizing the income, the income tax that is the object of economic benefits should lose its premise. Such income cannot be levied on taxable income. However, it should be clearly stated that the taxpayer has no income from taxation by asserting and proving such circumstance. In such a case, whether the claim is impossible to recover should be determined by an objective method of assessment by taking into account the debtor’s asset status and payment ability by taking into account the specific details and the following circumstances (see, e.g., Supreme Court Decision 2001Du1536, Oct. 25, 2002).

Here, an individual’s transfer income should be determined at the time of filing a final return of tax base or based on the time of determination or correction of tax base and tax amount, or based on the time of closing argument at the fact-finding court. However, the impossibility of recovering claims becomes a ground for follow-up correction as prescribed in Article 45-2(2) of the Framework Act on National Taxes and Article 25-2 subparag. 4 of the Enforcement Decree of the Framework Act on National Taxes (see Supreme Court Decision 2013Du18810, Jan. 29, 2014). Since a ground for follow-up correction can be asserted in a lawsuit seeking revocation of tax disposition (see Supreme Court Decision 2001Du5989, Sept. 27, 2002), it is reasonable to see as the latter as the Supreme Court’s ruling that the time of determining non-business interest income is electronic (see Supreme Court Decision 2013Du6718, Sep. 13, 2013).

B) ○○○○ had a claim amounting to KRW 1.3 billion against the Plaintiff, and KRW 1.37 billion against the instant company. However, the Plaintiff transferred KRW 2.4 billion to ○○○○○○○○, out of its personal debt and the instant company’s debt amount to ○○○○○○○. Therefore, the Plaintiff appears to have transferred KRW 2.4 billion to ○○○○○ in order to repay its debt to ○○○○○○○ in the instant shares (which the Plaintiff did not have a duty to pay its debt to ○○○○○ in the instant company), but it is difficult to view that ○○○○○○○○ was a major shareholder of the instant company, and thus, it is difficult to view that the Plaintiff was not liable for the instant company’s debt amount to ○○○○○○ in the instant case, regardless of whether ○○○ actually collected its debt amount from B, the Plaintiff did not have any other obligation to secure its entire claim amount to 2.4 billion in the instant shares.

○ Even after the filing of the instant lawsuit, the BB had a house and neighborhood living facilities in ○○○○○○-dong 43-2, 43-4, and 43-9. However, even if the Plaintiff’s assertion was a fire, the Plaintiff cannot be readily concluded that the BB was in insolvent, as long as the possibility that the BB would have received fire insurance proceeds or would have been destroyed after the sale of the building through negotiations with the owner of the land, even if the Plaintiff’s assertion was a fire.

○B is currently registered as an internal director of the instant company, and the possibility of holding the instant shares cannot be ruled out, and there is no evidence to deem that the instant business is completely unnecessary and there is no value of the instant shares.

○B confirmed that ○○○ does not have any property with respect to the application for the disclosure of property by ○○, but this is objectively impossible to secure the authenticity of the response made by B, and this is currently in a form of multiple times, but the B had agreed with the victim during the appellate trial, which led to the failure of the victim to punish B, and further, it seems that there was no filing of a petition for bankruptcy with the court or registered as a bad credit holder with the financial institution.

C) Therefore, the Plaintiff’s assertion on this part cannot be accepted.

(d) Any other determination

1) The Defendant stated that the transfer price of the instant shares was set under the Plaintiff’s name on the instant real estate in the process of transferring the instant shares, and the Plaintiff’s assertion to the effect that the transfer price of the instant shares was set in the name of the Plaintiff. However, in light of the evidence and facts as seen earlier, and the overall purport of pleadings, the Plaintiff and the BB separately set the transfer price payment date of the instant shares until August 10, 2012. Since the instant real estate was set under the priority collective security right, the establishment of a collective security right on the instant real estate could not be anticipated that all of the transfer price of the instant shares would have been secured, and the Plaintiff and B could not be seen as the payment of the instant shares under the premise that the transfer price of the instant shares still existed in the process of the instant lawsuit, based on the premise that the sale price of the instant shares still existed in the name of the Plaintiff, the payment of the purchase price was set in the name of the Plaintiff or the Plaintiff’s own agreement to reduce the transfer price.

2) The Defendant did not take any measure on the B’s property to recover the remainder excluding the part of the transfer price of the instant shares that the Plaintiff transferred to Ma○○○ by the time of the instant disposal (AB until the closure of pleadings), and therefore, the Plaintiff’s waiver of the claim for the transfer price of the instant shares is deemed to have been made. Accordingly, the Plaintiff’s waiver of the claim cannot be excluded from the transfer income of the instant shares. However, the Plaintiff’s waiver of the claim is premised on the fact that the claim is final and conclusive. As such, if a claim is deemed impossible to recover after-the-fact, and there is no transfer income that constitutes a claim or a premise, the waiver of the claim cannot be deemed to have been excluded from the transfer income of the instant shares even if it was impossible to establish, and even if there was the waiver of the claim, it cannot be concluded that the Plaintiff renounced the claim for the transfer price of the instant shares up to KRW 00 million solely on the basis of the Defendant’s assertion, and no additional circumstance exists to deem otherwise (such as the Plaintiff’s tax office is not subject to the gift exemption from the gift tax due to BB.).

E. Sub-committee

Therefore, the instant disposition is lawful.

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.