Where the value of shares is evaluated by applying supplementary evaluation methods, the value of shares is not changed even after the contract for sale in lots is cancelled.

Where the value of shares is appraised by applying the supplementary evaluation method as of the commencement date of inheritance or donation date, there is no change in the value of shares even after the contract for sale has been cancelled after the commencement date or donation

Donation, etc. of profits from transfer at low prices and high prices under Article 35 of the former Inheritance Tax and Gift Tax Act

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s gift tax of KRW 135,330,890 on December 15, 2006 to the Plaintiff on April 4, 2013

(2) The disposition of imposition shall be revoked.

1. Details of the disposition;

A.O development corporation (hereinafter referred to as "O development") is a non-permanent corporation (the total number of issued stocks is 100,000 shares) whose business purpose is the creation of housing site, construction business, real estate leasing and sale business, sales business, etc., and newly constructed and sold the Yongsan Ballast (hereinafter referred to as "the apartment of this case") in Seoul OO-gu 2-37.

B. On December 15, 2006, the Plaintiff, as an internal director of theO development, acquired 6,000 shares of O development (hereinafter “instant shares”) from 5,000 won per share. Meanwhile, on the other hand, around 2003 through 2005, part of the sales contract concluded on the instant apartment around 2008.

Time of cancellation

Value of supply by business year (units 2, 3) (units 3-2, 3-2, 2003)

204

205

Total

On or around March 2008, 4,522,78,203 7,930,058,309 6,784,183,776 19,237,030,288 1,107,958,903,584 1,661,617,917,0534,70534,708,765,595, and 109 of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter referred to as the "former Enforcement Decree") were cancelled on or around July 1, 208 as follows: The defendant's value of the shares of this case is substantially lower than the net asset value of 30,010 won per share under Article 54 and 5611 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16510,51061).

D. The Plaintiff dissatisfied with the request for adjudication on June 27, 2013. However, the Tax Tribunal did not have any dispute as to the dismissal decision on November 8, 2013, and the purport of the whole pleadings as to the facts that there was no dispute as to the recognition of the dismissal decision on November 8, 2013, Gap Nos. 1, 2, 3, and Eul Nos. 1 and 6 (including each number), and all pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the value of unlisted stocks shall be the net value per share (i.e., the average amount of profit and loss per share for the preceding three years ± the rate determined and publicly notified by the Minister of Strategy and Finance by taking into account the distribution rate of corporate bonds with three years maturity maturity ± (i.e., the net asset value of the pertinent corporation ± the total number of issued and outstanding stocks) and the net asset value per share shall be the weighted average value of 3:2 of each company, respectively. The net asset value per share shall be calculated by dividing the net asset value of the pertinent corporation into the total number of issued and outstanding stocks. The net asset value of the pertinent corporation shall be the net asset value of the pertinent corporation as of the evaluation date. If the contract is terminated after the sale of the apartment house in this case, the sales of the existing building in this case shall be deemed to have no retroactive effect at the time of conclusion of the contract. Thus, the sale of the corporation shall be calculated retroactively to the net asset value of the unlisted corporation.

2) The district tax office has refunded corporate tax and value-added tax retroactively to the sales rescinded, but the corporation's income for each business year was excluded after the audit by the National Tax Service, and revaluated the value of the instant stocks accordingly. This is contrary to the principle of trust protection.

3) In 2013, the Defendant assessed the stock value per share of the instant shares to the Plaintiff as KRW 130,058, and notified the Plaintiff of correction and notification of KRW 135,330,890 of gift tax. However, the Plaintiff’s application for payment in kind did not allow the Defendant to pay in kind by evaluating the value of stocks per O development as KRW 0 per share. This is against the principle of equity.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Determination on the first argument

Article 60 (1) of the former Inheritance Tax and Gift Tax Act provides that the value of an asset on which inheritance tax or gift tax is levied under this Act shall be deemed to be based on the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the “date of appraisal”) and Article 54 (1) of the Enforcement Decree of the same Act delegated under Article 63 (1) 1 (c) of the same Act provides that unlisted stocks shall be deemed to be based on the average of net asset value per share (hereinafter referred to as the “net profit and loss value”) assessed according to the following formula (the average of net profit and loss per share for the latest three years ± the rate determined and publicly notified by the Commissioner of the National Tax Service taking into account the rate of return on distribution of bonds with three-year maturity which are guaranteed by the financial institution) and net asset value per share, and Article 55 (1) of the Enforcement Decree of the same Act provides that the net asset value under the provisions of Article 54 (2) of the same Act shall be the value obtained by subtracting the liabilities from the value assessed under the provisions of Articles 60 through 6666 of the Act as of the date of inheritance:

① Article 56(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the net profit and loss value of unlisted stocks shall be calculated on the basis of an weighted average value of profit and loss for three years prior to the evaluation base date. The method of assessing the value of stocks by using the corporation’s profit may be a method based on future profit and past profit, but the method of assessing the value of stocks by using the corporation’s profit may be a method based on future profit, but the method of assessing the value based on past profit

② The market price presented under the former Inheritance Tax and Gift Tax Act is not the real value of the pertinent donated property, but the market price on the evaluation base date, which can be seen as formed when transactions were conducted on the evaluation base date. Since information that can be reflected on the formation of the market price on the evaluation base date exists on the evaluation base date, the net profit and loss value for the immediately preceding three years may be reflected, but, i.e., information that does not exist on the evaluation base date, may not be reflected in the net profit and loss value that has not yet arrived. ③ The Plaintiff asserted that, around March 2008 and July 2008, the sales contract should not be retroactively sold on the date when the contract concluded and sold in the year 2003 to 2005 was rescinded. However, the cancellation of the sale contract cannot be reflected in the assessment of the stocks of this case since the Plaintiff acquired the stocks of this case.

(4) In calculating the amount of income of a domestic corporation running a construction business, the basic common rules of the Corporate Tax Act (40-694) provides that in case where the amount of income calculated according to the initial work progress rate has a difference between the amount determined as the amount of income due to the cancellation of a construction contract and the amount determined as the amount of income due to the cancellation of the construction contract, the difference shall be included in the gross income or deductible expenses for the business year in which the cancellation date belongs. Thus, if the sales contract was cancelled due

(5) If a transfer income tax is imposed on income from the transfer of assets, and the sales contract becomes null and void from the beginning or becomes void later, etc., the sales proceeds received by the transferor should be returned to the transferee in principle, and thus, it cannot be deemed as subject to taxation of transfer income tax by considering the transferor’s income (see, e.g., Supreme Court en banc Decision 2010Du23644, Jul. 21, 201). This differs from the computation of market price under the former Inheritance Tax and Gift Tax Act.

④ In accordance with the relevant regulations, the Defendant calculated the net asset value per share by reflecting the net profit and loss value per share as of the base date of appraisal, assets, liabilities, etc. as of the base date of appraisal, etc., and calculated as 6,171 won per share, by applying the weighted average of net profit and loss value for the last three years, and calculated as 130,058 won by weighted average of the above net profit and loss value and the net asset value for each share.

2) Judgment on the second argument

In general, in order to apply the principle of trust and good faith to the acts of tax authorities in tax law, the tax authorities must issue a public opinion list that is the object of trust to taxpayers, and the taxpayer has no reason to be responsible to the taxpayer for reliance. The taxpayer must act in trust and what is against the opinion list, and the tax authorities shall make a disposition contrary to the public opinion list, thereby infringing the taxpayer’s interest (see Supreme Court Decision 2001Du9103, Nov. 26, 2002). Such principle of trust protection or the principle of respect for tax practices stipulated in Article 18(3) of the Framework Act on National Taxes can only be applied where there are special circumstances where the taxpayer’s reliance is deemed to be consistent with the concept of justice, and even if there are no special circumstances where the defendant’s act of protecting the taxpayer’s reliance on the Plaintiff’s reliance on the public opinion that is the object of public interest, such as the cancellation of the contract and its application cannot be seen to be a violation of the Plaintiff’s reliance on the Plaintiff’s reliance on the portion of tax office.

3) Judgment on the third argument

Inasmuch as the value at the time of the disposal of the instant shares calculated by the supplementary evaluation method was assessed as at the time of the payment of the tax amount based on the said disposal to the stocks, i.e., the value at the time of payment in kind, inasmuch as the basis provisions on the evaluation timing and evaluation methods differ, it cannot be deemed that the instant disposition, which assessed the instant shares in accordance with the supplementary evaluation methods, is contrary to the principle of equity (see Supreme Court Decision 2007Du8652, Mar. 12, 2009). Therefore, the Plaintiff’s assertion is groundless.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.