Plaintiff (Law Firm Woo, Attorneys Southern-soo et al., Counsel for the plaintiff-appellant)

Head of Nowon Tax Office

August 22, 2013

Seoul Administrative Court Decision 2012Guhap25538 Decided February 22, 2013

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant's imposition of gift tax of KRW 4,004,00 on January 10, 2012, and KRW 60,006,034 on gift tax, and KRW 3,774,970 on December 6, 2012, and KRW 55,205,550 on gift tax shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning of this court's reasoning is as follows: (a) part of the reasoning of the judgment of the court of first instance is written as follows; and (b) other than adding the judgment of the plaintiffs to "paragraph (3)", the reasoning of the judgment of the court of first instance is as stated in the reasoning of the judgment of the court of first instance; and (c) therefore, it is accepted in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence

2. Parts to be dried;

(a) Forms 2 through 9 of the decision of the first instance shall be followed in the following manner:

(1) As to the assertion that there was no tax avoidance purpose

(A) The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter "the Inheritance Tax and Gift Tax Act") which applies to the disposition of this case is to recognize an exception to the substance over form principle in the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, if the title trust was deemed to have been made for reasons other than the purpose of tax avoidance, and it is merely a minor reduction of tax incidental to the title trust, it cannot be readily concluded that there was such purpose of tax avoidance. However, in light of the above legislative purpose, only if the purpose of the title trust is not included in the purpose of tax avoidance, it cannot be deemed to have been deemed to have been deemed to have been deemed to have been deemed to have been donated by applying the proviso of the above Article, and thus, it cannot be deemed that there was no objective or objective purpose of tax avoidance, which is to be proven to the extent that the title truster did not have any other purpose of tax avoidance in the title trust (see Supreme Court Decision 20120.

(B) The Plaintiff alleged that the title trust of Nonparty 1 (the Nonparty 2) was the primary purpose of freely disposing of the shares held by the Financial Supervisory Commission or the Korea Exchange, not to evade taxes. However, according to Article 20-2(1) of the former Securities and Exchange Act and Article 147(1) of the former Capital Markets Act (amended by Act No. 8635, Aug. 3, 2007; hereinafter the “Capital Markets Act”), if the Plaintiff did not own 5% or more of the shares under the name of Nonparty 1 (the Plaintiff’s title trust of Nonparty 2) and the Plaintiff’s non-party 1 (the Plaintiff’s non-party 3) were not subject to the duty to report to the Financial Services Commission and the Korea Exchange, and thus, it is difficult to deem that the Plaintiff’s ownership of the shares was not restricted by the Plaintiff’s right to dispose of the shares held by the non-party 1 (the non-party 2) for the purpose of freely disposing of the shares (the non-party 1).

(C) Ultimately, the Plaintiff’s assertion that the instant disposition was unlawful on a different premise is without merit.

(b) Forms 7 through 12 of the first instance judgment shall be followed in the following manner:

(2) As to the Defendant’s assertion that the method of calculating the gift value is erroneous

(A) Article 60 of the Inheritance and Gift Tax Act provides that the value assessed according to the method of appraisal as stipulated in Article 63 (1) 1 (a) and (b) of the Inheritance and Gift Tax Act shall be “market price” corresponding to the value of property on which gift tax is levied. Article 63 (1) 1 (a) of the Inheritance and Gift Tax Act provides that the average value of stocks and equity shares traded with the Korea Stock Exchange shall be the average market price published every two months before and after the base date of appraisal: Provided, That in the calculation of the average value of the stocks and equity shares traded with the Korea Stock Exchange before and after the base date of appraisal if it is inappropriate to determine the average value on the base date of appraisal due to the occurrence of reasons such as capital increase or merger during 2 months before and after the base date of appraisal, the average value of the stocks and outstanding shares before and after the 20 months before and after the base date of appraisal shall be determined by the Presidential Decree from the date immediately before and after the base date of appraisal;

(B) However, there are various stages such as the shareholder allocation and the third party allocation method, the company's capital increase through the issuance of new shares, the public notice of the board's resolution and the capital increase, the plan and the basic date of the issuance of new shares, the resolution of the board of directors on the third party allocation, the payment of stock price, the registration of capital increase, etc., are different according to the period of evaluation.

(1) In the case of the issuance of shares, the parties trading shares in the case of the public announcement of the increase in the capital, as a matter of principle, have a considerable impact on the formation of the stock price. However, in the case of the method of allocating shares, the shareholders have the right to participate in the issue of new shares allotment to determine preemptive rights, and to hold shares on the base date. Meanwhile, in principle, a listed corporation has the right to participate in the issue of new shares to purchase shares within two days prior to the base date, and even if shares are purchased at one day prior to the base date, it is deemed that the value of shares per day prior to the base date was lower than the value of shares two days prior to the base date because of the purchase of shares without the right to participate in the issue of new shares. The beginning price of shares trading on the following day is determined within a certain period of time on the basis of the closing price of shares before and after the base date (i.e., the price of new shares purchased at the first day after the 10th anniversary of the base date).

② Next, in the case of “where a shareholder allocation and a third party allocation are made simultaneously,” in the case of the instant capital increase by the members who were allocated a third party only for the forfeited stocks, such as the facts cited earlier in the capital increase by the method of shareholder allocation, the number of new stocks and capital increase related to the capital increase are publicly announced due to the public announcement of capital increase, and since the stock price is newly formed due to the shareholder allocation method, the resolution of the board of directors for a third party allocation is deemed not to have a special effect on the already formed stock price. Therefore, even in that case, it is reasonable to view “the date of capital increase” for a shareholder allocation as “the date following the date on which a cause such as capital increase

(C) Furthermore, the purport of the tax law to assess the value of shares after the increase of shares is to be based on the calculation of the value of shares to be donated in the event that the above ground for the increase of shares occurred, as seen earlier, is to take account of the fact that such ground has a considerable impact on the formation of the next stock price. Since the stock price has already been issued before the payment of the shares was made, the first increase in the stock price would not have a significant effect on the increase in the number of shares when the share price is actually paid, it is generally determined that there is no higher correlation between the share price payment and the increase in the stock price. ② The Supreme Court Decision 2007Du7949 Decided August 20, 209, arguing that the share price increase should not be deemed to have been the date of the increase of shares to be the date of the above increase of shares to be the date of the above 3-party shares increase of the 20-party shares, it is not a 20-party share share share share price increase in the name of the plaintiff (the above 20-party shares increase of shares).

(D) Therefore, on the basis of the foregoing, setting the period during which the donated property value of the instant shares was assessed,

① As of December 31, 200 as of December 31, 2004, in the case of shares 220,000 shares of the members, which were transferred as of December 31, 2004, there is a considerable date of termination of rights ( February 7, 2005) to view that the date following the two-month period from the base date of appraisal as of December 31, 2004 to the date of the occurrence of the causes such as the increase of capital, etc. in connection with the increase of capital as of January 14, 2005. Thus, the period subject to appraisal is from November 1, 2004 (public holiday as of October 31, 2004) to February 4, 2005 (public holiday as of February 5, 2005; February 6, 2004); the average number of shares No. 19 (hereinafter the same shall apply); and the whole period of pleading as of February 19, 2005.

② In addition, in the case of the Plaintiff’s shares 1,460,222 shares of the members of the company, whose transfer date was changed as of March 15, 2005, there was a considerable date of the termination of rights ( February 7, 2005) to view that the date following the date on which the cause of the said increase of shares, etc. occurred within the period of two months prior to the base date of appraisal as of March 15, 2005, and thus, the assessment period is from February 7, 2005, which is two months after the base date of appraisal, to May 15, 2005, which is two months after the said base date of appraisal. According to the evidence above, the assessment price per share during the said period can be recognized as “26 won,” and there is no counter-proof.

(E) According to the facts cited earlier, the instant disposition is lawful, so long as it is deemed that the gift value is calculated based on the average price per share (i.e.,, the Plaintiff’s transfer of ownership in the future, ① KRW 182 per share of a member on December 31, 2004, ② the shares of a member on March 15, 2005 are “26 won” per share) as seen above. Ultimately, the instant disposition is unlawful. Accordingly, the Plaintiff’s assertion that the instant disposition was unlawful on a different premise cannot be accepted.

3. Additional determination as to the Plaintiff’s assertion

A. The plaintiff's assertion

The fact that the name holder of the instant shares was changed in the name of the Plaintiff, the name holder of the instant shares, is liable for assertion and certification by the tax authority in order to apply the constructive gift of title trust property under the Inheritance and Gift Tax Act. In this case, the Defendant did not sufficiently assert and prove it, and thus, the instant disposition should be revoked illegally.

B. Determination

In light of the purport of the statement of No. 4 and the whole pleadings, the plaintiff's transfer of ownership to each of the above shares is recognized in the first complaint of the plaintiff on December 31, 2004 and the 1,460,222 shares of the plaintiff on March 15, 2005 (refer to the 15 pages and No. 21 of the record). According to the purport of the statement of No. 15 of the evidence and the whole pleadings submitted by the defendant on March 15, 2005, the plaintiff's transfer of ownership to each of the above shares is recognized, and there is no other counter-proof. Ultimately, the plaintiff's assertion on this part is without merit, based on the premise that the defendant did not prove that the change of ownership was changed to the plaintiff on each of the above shares.

4. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just as above. Thus, the plaintiff's appeal of this case is dismissed.

Judges Lee Tae-tae (Presiding Judge)