In the event that the value of a non-listed stock is assessed at the market price, whether the premium rate for the shares held by the largest shareholder under Article 63(3) of the former Inheritance Tax and Gift Tax Act may be applied (negative)

Article 63(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 29, 200) provides that the rate of increase in the value of stocks held by the largest shareholder, etc. under the same Act shall be limited to the cases where the value of stocks is appraised by a supplementary method of assessment pursuant to Article 63(1)1 of the same Act and the value of stocks under a plan for disclosure to the public pursuant to Article 63(2) of the same Act is appraised by a supplementary method of assessment pursuant to Article 63(1)1 of the same Act, and the rate of increase in the value of stocks held by the largest shareholder, etc. shall be applied uniformly according to the ratio of stockholding by the largest shareholder, etc.

Article 63(1)1, (2), and (3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 29, 2000)

[Judgment of the court below]

Head of Geumcheon Tax Office

Seoul High Court Decision 2004Nu14962 delivered on June 9, 2005

The appeal is dismissed. The costs of appeal are assessed against the defendant.

1. Regarding ground of appeal No. 1

Article 63(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301, Dec. 29, 200; hereinafter “the Act”) provides for 20/100 of the value of the stocks such as the largest shareholder as prescribed by the Presidential Decree shall be added to the value assessed under the provisions of paragraphs (1) 1 and (2). However, if the largest shareholder, etc. holds stocks in excess of 50/100 of the total number of stocks issued by the relevant corporation, 30/100 shall be added to the value assessed under the provisions of Article 63(1)1 of the Act. According to the above provision, stocks subject to the increase rate as prescribed by the Act with respect to the stocks held by the largest shareholder, etc. shall be limited to cases where the value of stocks is assessed by supplementary evaluation methods in accordance with Article 63(1)1 of the Act, and even if it is estimated by the market value of the relevant stocks publicly prepared, the increase rate shall not be applied to the value of stocks appraised by the largest shareholder under Article 63(1).

In the same purport, the court below held that the defendant's measure of calculating the value of the shares by applying Article 63 (3) of the Act again to the amount of the market price so long as the defendant's evaluation of the value of the shares in this case's unlisted stocks is recognized as the market price which reflects the objective exchange value of 20,568 won per share, which is the actual market price, in the evaluation of the value of the shares in this case's unlisted stocks, is unlawful, and there is no error of law by misunderstanding the legal principles on the evaluation of

2. Regarding ground of appeal No. 2

After recognizing the facts based on the adopted evidence, the court below confirmed that 250 million won, which was received in cash from 80 million won of the disposal price of the real estate in this case, was used for the payment of KRW 130 million, which is a part of the construction cost of new building that the deceased transferred to the Doe Construction Co., Ltd. before his birth. In light of the records, the above fact-finding and judgment of the court below are just and acceptable, and there is no error of law such as misconception of facts against the rules of evidence, as otherwise alleged in the ground of appeal.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Ji-hyung (Presiding Justice)