Plaintiff (Attorney Park Young-chul, Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

September 3, 2004

1. The defendant's disposition of imposition of gift tax of KRW 539,959,940 against the plaintiff on October 13, 2003 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 April 8, 1993, the Korea Asset Management Corporation commenced a public auction on November 27, 1998 with respect to the non-listed stocks of the non-party stock company (hereinafter “instant company”) that the heir paid in kind as inheritance tax (hereinafter “the instant stocks paid in kind”) with the minimum estimated sale price of KRW 571,760 per share on November 1, 1998. However, during the public auction procedure, the instant stocks paid in kind were not sold seven times until June 30, 1999, and the Korea Asset Management Corporation sold the instant stocks paid in kind to the Plaintiff under a negotiated contract to the Plaintiff for sale of KRW 285,80, the minimum estimated sale price per share on July 23, 199 (hereinafter “instant negotiated contract price”).

B. On October 22, 1999, the Plaintiff donated 1,507 non-listed shares of the instant company from Non-Party 2 (hereinafter “instant shares”) to the non-listed shares of the instant company, and calculated the gift value as KRW 430,821,160 (285,880 x 1,507 x 1,507 shares) by deeming the instant private contract price as the market value per share of the instant shares (hereinafter “market value of the instant shares”).

C. As to this, the Defendant assessed the value per share of the instant shares as KRW 1,070,866 by means of a supplementary assessment method under the Inheritance Tax and Gift Tax Act (hereinafter “the Act”), and assessed the gift value as KRW 1,613,795,062 ( KRW 1,070,866 x 1,507 x 1,507 x 1,507 ) on October 13, 2003, and decided and notified the Plaintiff of KRW 539,959,940 (hereinafter “instant disposition”).

D. The plaintiff requested a judgment on December 3, 2003, but the National Tax Tribunal dismissed the above claim on April 12, 2004.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to Gap evidence 4-1, 2, and 3-2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The allegations and issues of the parties

(1) Whether the price of the instant negotiated contract can be deemed as the market price of the instant shares

The Plaintiff asserts that even if the price of the instant negotiated contract is lower than the appraised value by supplementary evaluation methods under the law, the objective exchange values of the instant shares are properly reflected, so the market price of the instant shares is the market price.

As to this, the defendant asserts that in light of the fact that the Korea Asset Management Corporation started a public auction from 1998 to 2001 on the 52 non-listed stocks, but 30 persons participating in the public auction and sold only 23 cases. The private contract price of this case is the value reduced to 50% of the originally scheduled public auction price and is merely 27.6% of the value according to the supplementary evaluation method for the stocks of this case, the private contract price of this case cannot be deemed as the market price of the stocks of this case.

(2) Whether the instant disposition violates the principle of trust protection

The plaintiff made a positive answer to the question as to whether the director of the accounting division of the company of this case can regard the price of the stock of this case as the market price of the stock of this case, and the Commissioner of the National Tax Service made a positive answer. The plaintiff trusted the above answer, who assessed the market price of the stock of this case by the free contract price of this case and reported the inheritance tax.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

First, we examine whether the instant negotiated contract price can be seen as the market price of the instant shares.

(1) Articles 60(1) and 60(2) of the Act provide that the value of the property on which the gift tax is levied shall be based on the market price as of the date of donation, and the market price shall be recognized as the market price under the conditions as prescribed by the Presidential Decree, such as the public sale price. Article 49(1)3 of the former Enforcement Decree, which was applied at the time of donation of the stocks of this case, stipulates that in the case of the donation, where there is a fact of public sale of the pertinent property within three months before the base date of appraisal, the amount of the public sale shall be deemed as the market price. According to the above provisions, where the public sale of the stocks of this case was made within three months before the donation of the stocks of this case

In addition, as seen earlier, the Korea Asset Management Corporation that did not sell the shares paid in kind to the Plaintiff seven times or more for the public sale of the shares paid in kind in the case of the Plaintiff by a negotiated contract. As such, the negotiated contract price is equivalent to the public sale price stipulated in Article 60(2) of the Act and Article 49(1)3 of the former Enforcement Decree, and a negotiated contract for the shares paid in kind was made on July 23, 1999, which was within three months before October 22, 1999 when the shares were donated in the case of the instant shares, so the negotiated contract price of the instant shares shall be deemed to constitute the market price in calculating the donation price of the instant shares.

(2) The defendant asserts that the non-listed stocks paid in kind, unlike general public sale or private contract, are purchased through a free contract by the plaintiff, who is the inheritor. Thus, the price of the private contract of this case cannot be deemed to fall under the market price stipulated in Article 60 (2) of the Act and Article 49 (1) 3 of the former Enforcement Decree. However, the defendant's above assertion is without merit when examining

First, under the principle of no taxation without law, a tax law interpretation shall be interpreted as a statutory interpretation, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, Article 60(2) of the former Enforcement Decree provides that the market price of the donated property, which is the basis for calculating the donated value, shall include the sale price, etc., and Article 49(1)3 of the former Enforcement Decree provides that where a public sale of the pertinent property is conducted, the public sale price shall be deemed to be the market price under Article 60(2) of the Act, and it does not provide that the public sale price or a negotiated contract price shall not be included in the market price under Article 60(2) of the Act where a heir of the property paid in kind is either sold or purchased through a free contract under the law or the former Enforcement Decree. Therefore, where a heir of the property purchased the property through a public sale or a negotiated contract under Article 60(2) of the former Enforcement Decree without reasonable grounds and Article 49(1)3 of the former Enforcement Decree shall not be included in the market price.

Second, Article 60(2) of the Act provides that the market price, which serves as the basis for calculating the donation price, shall be “if a free transaction is made between many and unspecified persons” and the auction price shall be deemed to be the market price. In this case, where a free transaction is made between many and unspecified persons, it shall not mean a case where a transaction is made between many and unspecified persons, but a case where a possibility of free transaction is ensured between many and unspecified persons. The public auction price is included in the market price because its price is determined under the condition that there is possibility of free

Therefore, even where an heir purchases property paid in kind through a public auction or a negotiated contract, if the auction price or a negotiated contract is determined under the condition that it would be freely traded between many and unspecified persons, it shall be deemed that the auction price or the negotiated contract price falls under the market price stipulated in Article 60 (2) of the Act. In other words, even if an heir participates in the public auction procedure for the property paid in kind and the heir does not participate in the public auction or any other person does not participate in the public auction procedure and thus the heir sells the property by a negotiated contract, if the above public auction or a negotiated contract is guaranteed the free participation of many and unspecified persons, the auction price or the negotiated contract price shall be deemed to fall under the market price stipulated in Article 60 (2) of the Act. In other words, the auction price cannot be deemed to fall under the market price provided in Article 60 (2) of the Act.

However, in cases where the determination of the negotiated contract price of this case was made in a state where it is not guaranteed that the free transaction will be made between many and unspecified persons, for example, in cases where the possibility that the plaintiff or a third party other than the plaintiff can participate in public sale or private contract, the price of the instant negotiated contract of this case cannot be deemed the market price stipulated in Article 60(2) of the Act

Third, Articles 60(1) and 60(3) of the Act provide that the value of the property on which gift tax is levied shall be calculated at the market price as of the date of donation in cases where it is difficult to calculate the market price on the basis of the type, scale, transaction circumstances, etc. of the relevant property, based on the appraised value by the method prescribed in Articles 61 through 65 of the Act in consideration of the type, size, transaction conditions, etc. of the relevant property. As such, in principle, the Act provides that the valuation of the donation value is based on the market price. As such, the sale price, auction price, and public auction price, which are the market price in cases where the property is sold, sold, sold, or sold at public auction, shall not be necessarily reflected in the adequate exchange value of the property. This is because the sale price, etc. of the property is determined by the supply and demand based on various factors, such as the possibility of easy loss in addition to the adequate exchange value of the property. In particular, there may be a big gap between the market price and adequate exchange value.

Therefore, even if there is a difference between the public auction price or private contract price in the public auction of unlisted stocks paid in kind and the value according to the supplementary assessment method under Article 54 of the former Enforcement Decree, the above public auction price or private contract price cannot be deemed to fall under the market price under Article 60 (2) of the Act on the sole ground of such difference.

Fourth, Article 49(1)3 of the Enforcement Decree of the amended Act newly established the proviso that where an heir of the property paid in kind receives a public sale of the property, the sale price concerned shall not be deemed the market price under Article 60(2)3 of the former Enforcement Decree. This proviso cannot be deemed to be a provision that is naturally accepted as a matter of course in the interpretation of Article 49(1)3 of the former Enforcement Decree, and where an heir of the property paid in kind is a public sale, it shall not be deemed to be the market price under Article 60(2) of the Act and shall be deemed to be a special provision for calculating the value of the property in accordance with the supplementary method under Article 54(1)3 of the Enforcement Decree, rather than the market price under Article 60(2) of the former Enforcement Decree. Therefore, in calculating the gift value of the shares in this case, it is practically impossible to regard the free contract price of this case as the market price of the shares in this case on the ground that the Plaintiff, the heir, purchases by a free contract.

(3) Therefore, without examining the remaining arguments of the Plaintiff, the instant disposition is unlawful.

3. Conclusion

Therefore, the plaintiff's claim seeking the revocation of the disposition of this case is with merit, and it is dismissed. It is so decided as per Disposition.

Judge Han-gu (Presiding Judge)