[1] Whether the "net asset value of the above formula" can be assessed in calculating the value per share in accordance with the formula under Article 5 (6) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act, which is a supplementary evaluation method of unlisted stocks (affirmative)

[2] In the case where the net profit and loss amount has increased considerably due to the disposal of fixed assets in the three years prior to the commencement of the inheritance in accordance with the formula under Article 5 (6) 1 (b) (2) of the former Enforcement Decree of the Inheritance Tax Act, which is a supplementary evaluation method of unlisted stocks, in the case where the net profit and loss amount has increased considerably due to the disposal of fixed assets in the three years prior to the commencement of the inheritance, whether it is reasonable to calculate the net profit and loss amount per share by the formula under Article 5 (6) 1 (f) and

[1] As to the method of supplementary valuation of unlisted stocks of a corporation, the method of valuation shall be prescribed in the formula of calculating the value per stock of unlisted stocks under Article 5 (6) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 14469 of Dec. 31, 1994) (amended by Presidential Decree No. 14862 of Dec. 30, 195), and the (c) item (b) shall be deemed to have deducted the debt from the value appraised as of the date of commencing the inheritance under the conditions as prescribed by this Decree, but the appraisal may be made based on the market value of the reliable appraisal institution. The purport of this provision is that, in case of calculating the value of real estate to assess the net asset value, if there is an objective and reasonable method of appraisal by the public trust appraisal institution, the net asset value shall not be deemed to be unlawful.

[2] Article 9 (2) of the former Inheritance Tax Act (amended by Act No. 4805 of Dec. 2, 1994) provides that the weighted average of profits and losses per share during the latest five years before and after the commencement of inheritance x (amended by Act No. 5193 of Dec. 30, 1996), and Article 5 (1) and (2) 1 (b) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 1469 of Dec. 31, 1995) provides that the net profits and losses per share during the latest three years before and after the commencement of inheritance shall be calculated by taking into account the net profits and losses per share during the latest three years x (the weighted average profits and losses per share before and after the commencement of inheritance x the net profits and losses per share 6 years before and after the commencement of inheritance x the net profits and losses per share calculated by the current net profits and losses per share 1).

[1] Article 9(2)(see current Article 60(3) and (4) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 4805, Dec. 22, 1994); Article 5(2) and (6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 5193, Dec. 30, 1996; see current Article 66 of the Inheritance Tax and Gift Tax Act); Article 5(2) and (6)1(b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1469, Dec. 31, 1994; see current Article 63; Article 5-2(3) and (4) of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 14862, Dec. 30, 199; see current Article 96(1) and (3) of the Inheritance Tax and Gift Tax Act)

[1] Supreme Court Decision 95Nu18062, 18079 decided Dec. 10, 1996 (Gong1997Sang, 413)

Plaintiff 1 and four others (Attorney Kim Dong-dong, Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

Seoul High Court Decision 97Gu2902 delivered on July 9, 1999

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

1. As to the share assessment portion of the U.S. parent company

According to the reasoning of the judgment below, the court below acknowledged the following facts: when the defendant assessed the shares of the non-listed corporation, the non-listed shares of the non-listed corporation (hereinafter referred to as the "unlisted corporation") and calculated the total amount of assets of the non-listed corporation as of the commencement date of inheritance at KRW 27.16,917,478; the total amount of assets includes KRW 17.1,2530,000 won in the land stated in attached Table 1 (a) (hereinafter referred to as the "land for the security of this case") as stated in the judgment below; the value of the land for the security of this case shall be appraised by the Korea Appraisal Board on January 17, 1994 by requesting the appraisal value of the shares of the non-listed corporation (hereinafter referred to as the "unlisted corporation") or the appraisal value of the shares of the non-listed corporation to be appraised by the Korea Appraisal Board on the basis of the provisions of the former Inheritance Tax Act (amended by Act No. 4805, Dec. 22, 1996>

However, with respect to the method of the supplementary valuation of the unlisted stocks of a corporation, the method of calculating the value per share of unlisted stocks under Article 5 (6) 1 (b) of the Decree shall be prescribed in the formula of calculating the value of the unlisted stocks, and (c) the net asset value of the item (b) shall be deemed to have been deducted from the value assessed as of the date the inheritance commences, and the net asset value of the item (b) shall be deemed to have been deducted from the amount assessed as of the date the inheritance commences, as prescribed by this Decree, but such appraisal may be conducted by a reliable appraisal agency’s market value appraisal. Thus, the purport of this provision is that the method of the market value appraisal may be used to properly reflect the market value (see Supreme Court Decision 95Nu18062, 18079, Dec. 10, 1996). In the calculation of the value of real estate for the assessment of the net asset value, if the market value assessed in an objective and reasonable manner by a reliable appraisal agency under this provision is not unlawful.

Therefore, the court below should have judged the legitimacy of the assessment method by examining whether the appraisal method of the Korea Appraisal Board, which is based on the appraisal standard of the land used for the purpose of this case, constitutes the market price appraisal that satisfies the above requirements, while evaluating the net asset value of the stocks used for the purpose of calculating the value of the stocks used for the purpose of this case. However, such a review was not conducted at all, and it was judged that the assessment method of the land used for the purpose of this case was unlawful on the grounds as seen above. This is erroneous in the misapprehension of legal principles as to the assessment method of unlisted stocks

The part of the grounds of appeal assigning this error is with merit.

2. As to the share evaluation portion of the Shin Young-ro Stock Company

According to the reasoning of the lower judgment, the lower court: (a) assessed the net profit of 3.9 billion won by 192 as KRW 40,535,65 won; (b) calculated the weighted average profit of 3.9 billion by 3.4 billion; (c) calculated the net profit of 3.6 billion won by 3.4 billion won; (d) calculated the weighted average profit of 9.3 billion won for 1992 as KRW 3.6 billion; (e) calculated by 3.6 billion for 194 billion; and (e., the net profit of 9.3 billion won for 3.6 billion won for 196 billion; and (e) calculated by 9.3 billion won for 3.6 billion won for 196 billion won for 3.6 billion won for 196 billion won for 194; and (e) determined that the net profit of 9.3 billion won for 196 billion won for 193.6 billion won for 196 billion won for 3 billion won for 196.6 billion won for 196 billion won

According to Article 9(2) of the Act, Article 5(1), (2)1, (6)1(b)(ii), and Article 5(4) of the Enforcement Rule of the same Act (amended by Ordinance of the Prime Minister No. 498 of Apr. 1, 1995), the value of unlisted stocks which are inherited property shall be the market value at the time of inheritance, but if it is difficult to calculate the market value, the average net value per share for the latest three years shall be the net value per share calculated by the formula prescribed in Article 5(6)1(b) of the Decree, and in such formula, the average net value per share for the latest three years shall be calculated [see, e.g., the average net value of profits and losses per share for the latest three years, calculated on the basis of the average value per share for the latest three years x the net value of profits and losses per share calculated on the basis of the net value of profits and losses per share x 6 months before the commencement of inheritance x 3 years before or after the commencement of inheritance].

Therefore, in this case where the net profit and loss of the year has increased significantly by disposing of fixed assets during the last three years, but there is no other data to evaluate the estimated profit and loss in conformity with the requirements of the Decree, it is reasonable that the defendant calculated the value of the shares of the sub-owned enterprise according to the "average average amount of net profit and loss for the last three years per share in the disposition of this case."

In addition, Article 5 (5) 1 of the Decree provides that the value shall be calculated by the method of "net profit of three years prior to the commencement date of inheritance (if it is less than three years, the period is less than three years) 】 equity capital 】 1/2 】 equity capital 】 interest rate of one-year maturity time deposit as of the commencement date of inheritance 】 】 5 (5) 1 of the Decree (in principle, 5 years) 】 The net profit of the disposal of fixed assets during the three years prior to the commencement date of inheritance, as in this case, the evaluation of the business right cannot be deemed unreasonable. Accordingly, the defendant's evaluation method of the business right of this case cannot be deemed unlawful.

Nevertheless, the court below judged that it was unlawful to calculate the value of profit and loss per share based on the net profit and loss (net profit) calculated by the defendant based on the provisions of the Decree during the last three years, when evaluating the shares of the sub-owned company. This is erroneous in the misapprehension of legal principles as to the method of assessing unlisted stocks by supplementary evaluation methods, which affected the conclusion of the judgment.

The part of the grounds of appeal assigning this error is with merit.

3. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Jin-hun (Presiding Justice)