The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

A. Article 40(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter “former Inheritance Tax Act”) provides, “In cases where a person who is the largest shareholder of a corporation that issued convertible bonds, etc. or a person in a special relationship with him/her acquires any of the following profits by converting into or exchanging stocks with convertible bonds, bonds with warrant (referring to warrant certificates where preemptive rights are separated) or other stocks or by issuing bonds entitled to take over stocks (hereinafter “convertible bonds, etc.”) or by converting into or exchanging stocks or accepting stocks with the bonds entitled to take over stocks, an amount equivalent to such profits shall be deemed the value of property donated to the person who has obtained such profits.”

B. In full view of the adopted evidence, the lower court acknowledged that B Co., Ltd. (hereinafter “B”) issued the instant bonds in the form of private placement on September 18, 2008, and upon which C (hereinafter “C”) acquired the entire bond and sold D Co., Ltd. (hereinafter “D”) a total of 20 copies of warrant certificates (50 million won total of 20 million won) to D Co., Ltd. (hereinafter “D”), and that D immediately sold 16 of the above 20 copies of warrant certificates to the Plaintiff on the same day, and on the following grounds, Article 40(1)2 (b) of the former Inheritance Tax and Gift Tax Act is gift tax.