Plaintiff (Law Firm LLC, Attorneys Gangseo-gu et al., Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

June 30, 2016

1. The Defendant’s imposition of gift tax of KRW 347,454,330 (including penalty tax) against the Plaintiff on September 1, 2014 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On October 23, 2009, the non-party UND Co., Ltd. (hereinafter “NED”) issued the 3rd time non-registered bonds with warrants (hereinafter “instant bonds with warrants”) with the total face value of KRW 4 billion separately from non-registered bonds with warrants, and the non-party Solomon Co., Ltd. (hereinafter “ Solomon”) acquired all of them.

B. On November 23, 2009, the Plaintiff, the largest shareholder of Almon, acquired from Solomon the warrant value of KRW 1 billion in face value, separated from the instant bonds with warrants (hereinafter “instant warrant value”), at KRW 50 million.

C. On September 16, 201, the Plaintiff exercised the warrant certificates in this case and received 1,014,198 shares of Aldididi. D. As a result, the Director of the Daejeon Regional Tax Office conducted an investigation into changes in the shares of Aldidi from May 19, 201 to July 11, 2014, the Plaintiff exercised the warrant certificates in this case, thereby notifying the Defendant of the relevant taxation data, by deeming that the Plaintiff obtained gains from conversion of shares of 976,00,752 won (=(2,332 won of the share price - 986 won of the conversion price) 】 (1,014,198 shares - 289,086 shares of its own shares) 】 (the number of shares to be actually issued) 】 (the number of shares to be transferred 1,014,198 shares - the number of its own shares).

E. In applying Article 40(1)2(b) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter “former Inheritance Tax Act”), the Defendant determined and notified the Plaintiff of KRW 347,454,330 (including additional tax) of gift tax (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence 1-1, 2, Gap evidence 2-1, 2-2, Gap evidence 6, Eul evidence 1-5, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

(a) Relevant statutes;

The entries in the attached Table-related statutes shall be as follows.

(b) Markets:

1) Whether Article 40(1)2(b) of the former Inheritance and Gift Tax Act is applied

A) Organization of issues

In order to apply Article 40(1)2(b) of the former Inheritance and Gift Tax Act (amended by Act No. 11845, May 28, 2013) to the Plaintiff’s acquisition and exercise of warrant certificates of this case, insofar as so-called solomons without special relation between the Plaintiff and Ealdidi is involved, ① solomon who transferred the instant warrant certificates of this case to the Plaintiff is an underwriter under Article 9(12) of the former Financial Investment Services and Capital Markets Act (amended by Act No. 11845, May 28, 2013), or ② The Plaintiff is merely a direct transaction between the Plaintiff and Ealdidi, but it is merely a transaction bypassing solomon without special relation for the purpose of evading gift tax.

B) the facts of recognition

① At the time of October 23, 2009 that issued the instant bonds with warrants, DNA was in crisis due to cumulative business losses, suspicion of embezzlement and breach of trust by the former representative director, dispute over management rights, etc.

② In order to overcome these circumstances, DNA entered into a contract for total acceptance of the instant bonds with Solomon and the instant bonds with warrants (hereinafter “instant contract”), and offered the deposit, stocks, real estate owned by the Plaintiff (including his spouse), and stocks as security.

③ The instant bonds with warrants were issued in the face value KRW 1 billion and four copies, and the division was prohibited for one year.

④ The original Solomon was the plan to sell immediately to the Plaintiff the warrant certificates amounting to 50% of the instant bonds with warrant to KRW 2 billion, and the remainder of KRW 50 billion was the plan to dispose of solomons owned for the purpose of investment.

⑤ Solomon presented the above terms and conditions to the Plaintiff, and Nonparty 1, upon introduction by the Plaintiff, to purchase the warrant certificates of KRW 2 billion on October 23, 2009, the instant warrant certificates could have been issued.

(6) However, as DNA is subject to the de facto examination of delisting on November 23, 2009, so Solomon demanded the Plaintiff to purchase the instant warrant certificates additionally, and on the same day, the Plaintiff acquired the instant warrant certificates in response to the said demand (under Article 15(1)2 of the instant contract, where trade has been generally interrupted in the securities market established by the Korea Exchange, or where the transaction of securities issued by DNA or affiliate companies has become significantly restricted, or where the transaction of securities was suspended in the securities market established by the Korea Exchange, or where significant restriction has occurred, solomon may rescind the instant contract).

7) The shares of DNA are traded in KRW 2,335 per share at the time of issuance of the instant bonds with warrants. At the time of purchase of the instant bonds with warrants, the Plaintiff felled to KRW 1,720 per share at the time of purchase of the instant bonds with warrants, and subsequently remains inside and outside of KRW 1,00 per year.

[Ground of recognition] Facts without dispute, Gap evidence 2-1, Gap evidence 3-1 through 8, Gap evidence 4-1 through 6, Gap evidence 5, 10, 12, Eul evidence 2, non-party 2's testimony and the purport of whole pleadings

C) the board:

According to the above facts, the bonds with warrants were issued in four copies and it was impossible to divide them into one year. Solomon intended to hold 50% of the above bonds with warrants including the warrant certificates of this case for the purpose of investment (in the case of an underwriter under the former Capital Markets Act, the term "sale" refers to the solicitation of an offer to sell or purchase securities to not less than 50 investors. Thus, so Solomon cannot be applicable to Solomon as it means an invitation of an offer to sell or purchase the securities). The 50% of the initial securities with warrant which the original Solomon tried to sell to the Plaintiff immediately. Nevertheless, the fact that the Plaintiff acquired additionally the warrant certificates of this case was changed due to changes in circumstances that the Plaintiff had been subject to de facto examination of delisting, and the United Nations was forced to enter into the contract of this case with Solomon for the purpose of investment (in the case of an underwriter under the former Capital Markets Act, it is difficult to see that the Plaintiff did not have any special interest in the process of exercising the securities with warrants of this case from the beginning.

2) Whether Article 42(1)3 of the former Inheritance and Gift Tax Act is applied

In order to apply Article 42(1)3 of the former Inheritance and Gift Tax Act to transactions between unrelated parties, Article 42(3) of the same Act requires that no “justifiable cause exists in light of transaction practices” should be verified by the tax authority (see Supreme Court Decision 2013Du24495, Feb. 12, 2015, etc.).

However, if Solomon holds 50% of the instant bonds with warrants for the original purpose of investment, as it is subject to the de-listing substance examination by Allomon, the Plaintiff sold the instant warrant certificates to the Plaintiff for the purpose of early recovery of investment returns, and as seen earlier, the United Nations Allomon and the Plaintiff, who was in the crisis of insolvency, had no choice but to accept the demand of Solomon under the instant contract. Therefore, the Plaintiff’s acquisition of the instant warrant certificates, cannot be said to have any justifiable ground under the transactional practice. Accordingly, Article 42(1)3 of the former Inheritance Tax and Gift Tax Act does not provide grounds to justify the instant disposition.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.

[Attachment]

Justices Kang Jong-hee (Presiding Justice) (Presiding Justice)