[1] Whether the sale price under Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act concerning unlisted stocks can be deemed as the market price under Article 60(2) of the Inheritance Tax and Gift Tax Act (affirmative)

[2] The case holding that it is reasonable to recognize the auction price of unlisted stocks, which are assets paid in kind, as the market price of the same type of unlisted stocks as the market price in the case where there are no special circumstances

[3] Whether the transaction price of the shares issued by the company can be deemed as the market price of the shares if the shares issued by the company are transferred together with management rights (negative)

[1] According to Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act, and Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 2000), the value of the property on which the inheritance tax or gift tax is imposed shall be the market value as of the date of commencing the inheritance or donation. The market value shall be the value generally established if the property is freely traded between many and unspecified persons. The market value includes the value of the property at issue if there is a fact of public auction during the period of six months before and after the commencement of the inheritance or three months before and after the donation date, and Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 200); Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act recognizes the market value without any restriction on the market value (amended by Presidential Decree No. 18170, etc. 9).

[2] The case affirming that the public auction price of unlisted stocks, which are property paid in kind, is recognized as the market price of the same type of unlisted stocks in the absence of special circumstances to exclude the market price of the public auction price

[3] Where shares issued by a company are transferred with the right of management, the transaction price cannot be deemed as the general market price reflecting the objective exchange value in the case of transfer with the right of management. The fact that the market price cannot be deemed as the market price for the transfer of shares that entail the control over the right of management cannot be deemed as the market price is the purport that the transfer of shares that entail the control over the right of management may be relatively high compared to the transfer of shares that entail the right of management. Therefore

[1] Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act; Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 2000) / [2] Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act; Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 2000) / [3] Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act; Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 200)

[3] Supreme Court Decision 80Nu543 delivered on February 23, 1982 (Gong1982, 386) Supreme Court Decision 88Nu1201 delivered on July 11, 1989 (Gong1989, 1261) Supreme Court Decision 2001Du9394 Delivered on June 13, 2003 (Gong2003Ha, 1545)

Plaintiff 1 and 14 others (Attorneys Lee Im-soo et al., Counsel for the plaintiff-appellant)

Goyang Tax Office and four others (Law Firm Rate, Attorneys Cho Young-sik et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2005Nu1031 delivered on August 24, 2005

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

The grounds of appeal are examined.

1. According to Article 60(1) and (2) of the Inheritance Tax and Gift Tax Act, Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 200; hereinafter “former Enforcement Decree”), the value of the property on which the inheritance tax or gift tax is levied shall be the market value as of the date of commencing the inheritance or donation. The market value shall include the value deemed ordinarily established if the property is freely traded between many and unspecified persons. The market value includes the public auction value where there is a public auction fact during the six months before or after the date of commencing the inheritance, or the three months after the date of donation. Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act which was applied at the time of receiving non-listed stocks of the non-party 2 corporation from the non-party 1, which was recognized as the market value without limitation, and Article 49(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act which was amended by Presidential Decree No. 1817.

In this case where there is no special circumstance to exclude the market value of the public auction on the record, it is just that the court below recognized the public auction value of the non-party 2 corporation's non-indicted 2 corporation's non-indicted 2 corporation's non-indicted 2 corporation of the same kind as the market value of the non-indicted 2 corporation's non-indicted 2 corporation of the same kind. There is no error in the misapprehension of legal principles as to the market value under Article 60 of the Inheritance Tax and Gift Tax Act as otherwise alleged in the ground of appeal. The Supreme Court Decision 97Nu3408 delivered on December 12, 19

2. Where shares issued by a company are transferred with the right of management, the transaction price cannot be considered as the general market price reflecting the objective exchange value when only shares are transferred (see Supreme Court Decisions 80Nu543, Feb. 23, 1982; 2001Du9394, Jun. 13, 2003; 2001Du9394, Jun. 13, 2003; 2003). The purport that the transfer price of shares accompanying the right of management can not be deemed as the market price because the transfer price of shares entails the right of management is relatively high compared to the transfer price of shares, so it is difficult to immediately view the transfer price as the general market price of the shares (see Supreme Court Decision 88Nu12011, Jul. 11, 1989). Thus, since the non-listed shares paid in kind entails the right of management of the non-indicted 2 corporation, it cannot be deemed as the market price of the shares paid in kind.

3. Therefore, all appeals are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Ill-sook (Presiding Justice)