Plaintiff (Attorney Jeong Byung-chul et al., Counsel for the plaintiff-appellant)

Head of the tax office;

December 21, 2006

Seoul Administrative Court Decision 2005Guhap39591 Decided June 16, 2006

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the plaintiff.

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition disposition of gift tax of KRW 688,493,202 against the Plaintiff on October 16, 2003, in excess of KRW 71,318,802, shall be revoked.

1. The reasoning of the court's explanation concerning this case is as follows, except for the modification and addition of part of the reasoning of the judgment of the court of first instance as follows. Thus, the reasoning of the judgment of the court of first instance is as stated in Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

【Correction/Supplementary Parts】

A. Article 39 and Article 29(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 6048, Dec. 28, 1999; hereinafter “Inheritance Tax and Gift Tax Act”) in Part 5 of Part 3 is amended as “Article 39 of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660, Dec. 31, 199; hereinafter “Enforcement Decree of the same Act”)”.

(b) in Part 3 of Part 4, the instant disposition is in violation of the tax law, etc., by adding “the instant disposition” as follows.

(c) for amendments to Chapters 6 through 17 on the fourth side:

Article 39 (Presumption of Donation at Time of Capital Increase or Capital Reduction) (1) Any person who has received any of the following profits when the capital or amount of investment of a corporation is increased or decreased, shall be deemed to have received the relevant profits as a donation.

1. In allocating new stocks or equity shares (hereafter in this paragraph, referred to as "new stocks") for the purpose of increasing the capital or investment amount of the corporation, benefits provided for in each of the following items (where there are not less than 2 minor shareholders who have renounced in whole or in part the right to receive new stocks, referring to the benefits that is calculated by deeming that one of the minor shareholders has renounced the right to receive new stocks, in case where there exist 2 or more minor shareholders who have renounced the right to receive new stocks):

(a) In case where such renounced new stocks (hereafter in this paragraph, referred to as the “actual stocks”), are again allocated (excluding the case where allocating such forfeited stocks by the public offering method of securities under Article 2 (3) of the Securities and Exchange Act), the benefits prescribed by the Presidential Decree from among the benefits acquired by a person who received the allocation of forfeited stocks by obtaining such allocation of forfeited stocks;

(d) modify each “trade fact” in Chapters 6, 5, 11, and 17 to “the fact of trade, etc. which may be recognized as the market price,” respectively;

(e) add to the last part of Chapter 6, paragraph 18, the following:

Article 60(2) of the Inheritance Tax and Gift Tax Act provides that the market price shall not be limited to that recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the expropriation, public sale and appraisal price, etc., although the Plaintiff asserts that the value of capital increase at the time of the fourth capital increase does not fall under the trading price, it cannot be recognized as the market price under the Inheritance Tax and Gift Tax Act. Thus, each subparagraph of Article 49(1) of the Enforcement Decree of the same Act upon delegation of the above provision is merely an example of representative cases that can be seen as the market price of donated property (see Supreme Court Decision 200Du5098, Aug. 21, 2001). Therefore, the Plaintiff’s above assertion cannot be accepted.

Finally, if the value of the Plaintiff’s capital increase within 3 months after the date of donation is 2 or more, the Plaintiff asserts that the price of KRW 10,00 per share, which is the price of new shares acquired on July 30, 199, should be applied to Nonparty 1, etc. However, if the Plaintiff’s price of KRW 10,00 per share, which is the price of new shares acquired on July 30, 199, including Nonparty 1, the date of appraisal, was 00,000,000,000 won for the above 9,000 won for the above 30,000 won for the above 9,000 won for the above 40,000 won for the above 9,000 won for the above 9,000 won for the above 9,000 won for the new shares acquired on July 30, 199, it appears that the Plaintiff’s new shares acquired on the basis of the above 30,000,03,000.

2. If so, the judgment of the first instance is legitimate, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

Judges Kim Tae-dae (Presiding Judge) Park Jae-dae (Presiding Judge)