Methods of evaluating unlisted stocks with actual examples of transactions in connection with deemed donation at the time of high-priced transfer;

[1] Article 9 (see current Article 60 of the Inheritance Tax and Gift Tax Act) Article 34-2 (2) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996) (see current Article 35 (1) 2 of the Inheritance Tax and Gift Tax Act) Article 5 (6) 1 (b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 14469 of Dec. 31, 1994) Article 41 (4) of the current Enforcement Decree of the Inheritance Tax and Gift Tax Act (see current Article 54 of the Inheritance Tax and Gift Tax Act)

Supreme Court Decision 88Nu3765 delivered on June 13, 1989 (Gong1989, 1082) Supreme Court Decision 89Nu85 delivered on February 13, 1990 (Gong1990, 684) Supreme Court Decision 92Nu787 delivered on February 26, 1993 (Gong1993Sang, 1108) Supreme Court Decision 92Nu16218 delivered on June 11, 1993 (Gong193Ha, 205Ha, 2054) Supreme Court Decision 95Nu23 delivered on June 13, 1995 (Gong195Ha, 2423 delivered on October 29, 196) 96Nu942397 delivered on June 29, 197 (Gong2009Du942397 delivered on June 29, 209).

Choi Ho-ho (Attorney Lee In-bok, Counsel for the defendant-appellant)

The Director of Gangnam District Office

Seoul High Court Decision 2002Nu1931 delivered on March 27, 2003

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

According to Article 34-2(2) of the former Inheritance Tax Act (amended by Act No. 5193 of Dec. 30, 1996), and Article 41(4) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 14469 of Dec. 31, 1994; hereinafter referred to as the "Enforcement Decree"), the "value which is remarkably high" in the provision on the constructive gift at the time of transfer of high value means the value at least 130/100 of the value appraised pursuant to Articles 5 through 7 of the Enforcement Decree based on the current status of the date of donation. According to Article 5 of the Enforcement Decree, the valuation of donated property is based on the market value as at the time of the commencement of donation, and the valuation of donated property by the method provided for in paragraphs (2) through (6) can be selected only when it is difficult to calculate the market value at the time of donation (see Supreme Court Decision 200Du4600 of Sep. 14, 2001).

Therefore, in the case of unlisted stocks with low market value, where there is a normal example of transactions that properly reflects their objective exchange value, such transaction value shall be deemed the market value and the value of the stocks shall be evaluated as the market value, and it shall not be assessed by supplementary evaluation methods under Article 5 (6) 1 (b) of the Enforcement Decree (see Supreme Court Decision 2000Du1287 delivered on July 28, 200).

According to the facts established by the court below and the records, the previous shares (which is the president of the Pacific Co., Ltd. at the time) were sold to 7,000 won per share to the Pacific Co., Ltd. on February 7, 1994. The defendant sold 50,000 won per share of the interesting securities to the Pacific Co., Ltd. on or around May 1997. The defendant sold the shares to 30,000 won per share, and the 90,000 won per share of the 90,000 won per share of the 1960,000 won per share of the shares to impose gift tax on the 90,06,822 shares of interesting securities that were paid to 30,000 won on or around February 7, 1994. The shares were sold to 19,00 won by the 19,000 won of the shares at the time of the 196,000 shares.

Although the court below erred in finding that the market price at the time of transfer of stocks of this case was 7,00 won per share on the basis of the transaction price between the specially related parties 10 months prior to that time, it is just to conclude that the transfer price does not fall under the "value significantly high" under Article 34-2 (2) of the Act, and there is no error of law such as misconception of facts due to violation of the rules of evidence and misunderstanding of legal principles as to the market price calculation of unlisted stocks

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 on the bench.

Justices Lee Han-gu (Presiding Justice)