Seoul Administrative Court 201Guhap29854 (24 December 2012)

The value of donated property due to the comprehensive share swap shall be appraised where the appraised value under Article 31-9 (2) 5 (b) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act is changed.

Where a corporation comes to vary before and after a capital transaction, as in the case of a comprehensive share swap, Article 31-9 (2) 5 (a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall not be applied, but on the other hand, the assessment difference before and after a change in the value due to the comprehensive share swap can be sufficiently calculated by applying subparagraph (b), the disposition

Article 42 (1) 3 of the former Inheritance Tax and Gift Tax Act

2012Nu20245 Revocation of Disposition of Levying Gift Tax

AA

○ Head of tax office

Seoul Administrative Court Decision 2011Guhap29854 Decided December 24, 2012

October 16, 2018

December 1, 2018

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The disposition of imposition of gift tax of KRW 12,095,863,060 against the Plaintiff on July 9, 2010 shall be revoked.

1. Details of the disposition;

The reasoning for this part of the judgment by the court is as stated in the corresponding part of the judgment of the court of first instance except for the following parts written or added. Thus, this part of the judgment is cited in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure

○ Use “530,992 won” as “530,991 won (hereinafter the same shall apply) in the table below the fourth 10 pages of the judgment of the first instance court, and add the following contents to the table below the said table:

As seen in the calculation of the following table, the value of donated property calculated by the Defendant at the time of the instant disposition was KRW 15,709,378,650 (at the time of the instant exchange contract, the Plaintiff held 29,400 shares in its own name, and 750 shares in AA’s name in total, and 30,150 shares in AA’s name).

(j) The Defendant changed the grounds for the instant disposition under Article 42(1)3 of the former Inheritance Tax and Gift Tax Act according to the purport of Supreme Court Decision 2012Du27787 Decided March 29, 2018.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) As to the change of reasons for the disposition

The plaintiff is not allowed to change the grounds for disposition, since the defendant changed the grounds for disposition and deducted the opportunity of appeal identical to the procedures for objection.

(ii) a legitimate cause under transaction practices;

The exchange contract of this case was made in accordance with the provisions of the Commercial Act and the former Securities and Exchange Act, and it was made through the procedures such as BB and CCC's board of directors, approval of the general meeting of shareholders and granting of appraisal rights according to the share swap ratio set based on the amount appraised by the external accounting corporation, so there is no justifiable reason in the practice of

3) Violation of the method of calculating the profit from donation

A) In the case of an all-inclusive share swap, the benefit of donation shall be calculated by applying mutatis mutandis Article 28(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) pursuant to Article 31-9(2)5(a) of the former Enforcement Decree of the Inheritance Tax

B) The Commercial Act and the former Securities and Exchange Act stipulate that the share value should be determined at the time of an all-inclusive share swap contract, so the evaluation base date of share value should be the "share swap contract date" rather than the "share swap date.

C) At the time of the instant exchange contract, the DD Accounting Corporation, an outside appraisal organization, assessed the share value of BB as KRW 188,657 per share in accordance with the requirements, methods, and procedures prescribed by the relevant laws, such as the former Securities and Exchange Act. Therefore, it shall be deemed as the appraised value. The Defendant’s 50,585 won assessed as the supplementary assessment method under the former Inheritance Tax and Gift Tax Act cannot be deemed as the market

D) Even if the above value cannot be seen as the market price, the shares in a number exceeding 86,500 shares issued by BB were sold to ○○○○ (hereinafter “○○○”) that is a foreign investment fund immediately after the instant exchange contract was entered into, and thus, KRW 474,547 per share should be deemed as the market price.

4) Violation of the principle of trust protection

Although the ○○○ Supervisory Board assessed BB’s value of shares under the former Securities and Exchange Act and other relevant statutes, it would violate the principle of trust protection to levy gift tax by revaluated the value of shares according to the complementary assessment method under the former Inheritance Tax and Gift Tax Act after the lapse of several years.

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

The reasons for the judgment in this part are the same as the corresponding part of the judgment of the first instance (from the last 5th to the 12th eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth eth e.

D. Determination

1) As to the changes in the underlying statutes and grounds for disposition

A) Article 42 (1) 3 of the former Inheritance Tax and Gift Tax Act provides that "if profits are acquired from the transactions that increase or decrease the capital (including the amount of investment) of a corporation, such as investment, reduction of capital, merger (including merger by division; hereinafter the same shall apply in this Article), merger, and exchange of stocks with convertible bonds, etc. under Article 40 (1), or gains from the change of ownership shares or the value of the corporation due to the change of business acquisition, business transfer, business exchange, corporate restructuring, etc., the relevant gains shall be deemed the value of the property donated to the person who has acquired such profits. In this case, the relevant gains shall be the value calculated by subtracting the value of stock conversion, etc. from the value of the stock as at the time of stock conversion, etc. in cases of stock conversion, etc., and in cases other than stock conversion, etc., it shall be the value of the relevant property before and after

An all-inclusive share swap under the Commercial Act is a combination of the transactions in which the shares of a company becoming a complete subsidiary are transferred to a company becoming a complete parent company and the transactions in which shareholders of a company becoming a complete subsidiary obtain from a company becoming a complete parent company for consideration for shares of a company becoming a complete parent company and become shareholders of a company becoming a complete parent company. In addition, whether shareholders of a company becoming a complete subsidiary obtain profits through an all-inclusive share swap are determined depending on whether the difference between the appraised value of the shares of the company becoming a complete subsidiary transferred to the company becoming a complete parent company and the appraised value of the new shares allocated by the company becoming a complete parent company, i.e., the difference between the appraised value of the shares of the company becoming a complete subsidiary transferred to the company becoming a complete parent company and the appraised value of the previous shares allocated by the company becoming a complete parent company. In full view of the structure and characteristics of an all-inclusive share swap under the Commercial Act, and the legislative purport and structure of the relevant provisions, the taxation of gift tax under Article 35(1)2 and (2)4) of the former Inheritance Tax Act shall not be imposed by applying Article 27 subparag.

B) A disposition agency may add or modify other grounds for disposition to the extent that the basic factual basis of the initial disposition is recognized to be identical, and the existence or absence of the basic factual basis is determined based on the same social factual basis, based on the specific factual basis prior to the legal evaluation of the grounds for disposition (see Supreme Court Decision 2013Du26118, May 16, 2014).

Article 42(1)3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 1131, Dec. 2, 2011; Act No. 1488, Jan. 1, 2011) provides that “The purpose of this case’s disposition is to ensure the exchange of this case under the exchange contract of this case, while maintaining the basic factual basis of the exchange of this case, and the legal assessment of this is different in accordance with the purport of the above Supreme Court Decision 2012Du27787.”

2) Whether there is good cause for transaction practice

A) The legislative purport of Article 42(1) of the former Inheritance Tax and Gift Tax Act, where the shareholders of a complete parent company transfer profits from the transaction that increases the capital of a corporation to the shareholders of a complete parent company without compensation, lies in coping with an altered donation act and promoting the fairness of taxation. However, in the case of the transaction between the unrelated parties, it is inevitable to allow the shareholders of a complete subsidiary to obtain the gift gains from the shareholders of a complete subsidiary while waiving an opportunity to obtain benefits generally and easily. As such, Article 42(3) of the former Inheritance Tax and Gift Tax Act provides that where there exists a reasonable ground to believe that the shareholders of a complete parent company should make a transaction by appropriately reflecting the objective exchange value even if the consequence of the transaction occurs, or where it is deemed that there is a justifiable reason for a complete parent company to obtain such transaction from a reasonable economic person, such as where there is no reasonable ground to believe that the shareholders of a complete parent company would have made an exchange of profits from the said transaction under the same conditions as the former Act and subordinate statutes, it is difficult to apply the same objective transaction terms and conditions to the extent that they do not have any specific reasons.

On the other hand, in the administrative litigation seeking revocation on the grounds of illegality of taxation disposition, the tax authority bears the burden of proving the legality of taxation disposition and the existence of taxation requirements.

The burden of proving that there is no justifiable reason for the transaction practice under Article 42(3) of the former Inheritance Tax and Gift Tax Act in the transaction between the parties is the principle that the tax authority bears the burden of proving that there is no justifiable reason for the transaction. However, if the tax authority is a rational economy, it may prove that there is no justifiable reason for the transaction practice by submitting the data on objective circumstances, etc. that the transaction did not have been traded under such conditions as at the time of the transaction, and if such circumstances are proven to a considerable extent, it is necessary to prove that there is a special circumstance that the taxpayer who is easy to submit specific data on the transaction circumstances, the reason for determining the transaction conditions, etc., can be seen as a normal transaction (see Supreme Court Decision 2013Du2495, Feb. 12, 2015).

B) In this case, there is no dispute that the Plaintiff and CCC or the shareholders of CCC do not have a special relationship. Furthermore, considering all the following circumstances revealed in addition to the aforementioned facts recognized and the entire purport of pleadings, it is reasonable to view that, if a reasonable economic person is an economic person, the objective circumstance that the Plaintiff would not have exchanged stocks under the terms and conditions stipulated in the instant exchange agreement was proven to the extent considerable. The Plaintiff’s assertion disputing this is without merit.

① In assessing the value of the instant shares, the SS estimated sales based on the figures indicated in the data on the present status of BB preparation issued by AB. In addition to the data on the present status, there is no objective evidence to support the legitimacy of the presumption of sales, and there is no evidence to deem that the sales amount in 2006 (53.1 billion won) was 45 billion won or more than the sales amount in 2005 (8.3 billion won). However, there is no evidence to deem that the sales amount in 2006 (5.3 billion won) was 45 billion won or more than the sales amount in 2005.

② From among the estimated sales in 2006, the ratio of the film and drama sales (36.9 billion won) initially attempted in 2006 to 70%, most of the estimated sales in 2006 to JJ-related sales, and the film or drama’s film or drama’s film as of December 5, 2005, which was the date of stock evaluation, was merely a planned work whose investors, directors, and scenarios were not completely determined, but was included in the estimated sales around October 2006. Moreover, it is difficult to view only the estimated sales amount of 2006 to have been determined based on objective and reasonable value of the instant sales from 206 to 206, without any binding force until 2005.

③ In 2005, the actual sales amount was reduced to KRW 1.7 billion, the actual sales amount was reduced to KRW 300 million, and the actual operating income amount was reduced to KRW 300 million. In 2006, the actual sales amount was reduced to KRW 40.2 billion, the actual operating income amount was reduced to KRW 6.7 billion, and the actual operating income amount was reduced to KRW 6.7 billion. This can be seen as supporting that the presumption itself was erroneous.

④ AB’s business plan in the year 2005 and 2006, which was prepared by the Plaintiff, stated that “AAA” was a person with no expertise in accounting, and that “the Plaintiff was instructed to prepare the business plan and prepared it only with experience without specific evidentiary materials or accounting standards, and the sales of film 3 (29.6 billion won), drama production (4.7 billion won) and music record business (4.2 billion won) were presumed to have been presumed to have been based on the Plaintiff’s direction.”

⑤ The SS, in its written evaluation statement prior to the revision, has written an evaluation statement after partially reducing the estimated sales amount in the year 2006, and only stated that “S has revised its evaluation statement at the request of the Financial Supervisory Service,” and there is no reasonable ground for amendment or finding objective grounds.

6. The stock value per share of BB assessed by the DD Accounting Corporation is 188,657 won, which is a value calculated by the Defendant’s supplementary assessment methods.

7) Examining these points, it is reasonable to view that the stock value per share of BB assessed by the DD Accounting Corporation is an excessive appraised value by simply based on the estimated sales amount presented by BB without objective data or by failing to properly consider the circumstances that are likely to be realized in light of the situation at the time, or by simply based on the data presented by BB without objective data.

④ At the time of the instant exchange contract, HH, which led to the instant exchange contract, acquired management rights of CCC through ZZ consulting, and appears to have owned or held 15,000 shares in the name of EE, FFF, or GG (17% of the total shares of BB) in the name of EE, GG. In addition, HH requested SS to assess the value of BB’s shares in the name of EE, FF, or GG. On January 24, 2006, immediately after the instant exchange contract was concluded, HH was appointed as the representative director of CCC, and immediately appointed SS as the auditor. In light of the foregoing, HH cannot be deemed to have conflicting interests between CCC and BB as the actual shareholders of CCC and BB. Accordingly, even if CCC and BB undergo a comprehensive stock exchange procedure, etc. under the Commercial Act such as a resolution of the board of directors, a special resolution of the general meeting of shareholders, etc.

9) It is necessary to view the instant stock exchange as being promoted by BBB, an unlisted corporation, for the purpose of bypassing through CCC, a KOSDAQ-listed corporation, differently from ordinary stock exchange.

3) Method of calculating the proceeds of donation;

A) Applicable Provisions

Article 31-9 (2) 5 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "for profits exceeding the standard prescribed by the Presidential Decree" under Article 31-9 (2) 5 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act means "for profits exceeding 30/100 of the value of the relevant property before or after the change in the ownership shares or the value thereof, or for the amount exceeding 300 million won." Then, Article 31-9 (2) 5 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act divides the calculation method with two items (a) and (b). Where the shares are changed (referring to the amount calculated by applying mutatis mutandis the provisions of Articles 28 through 29-3)." Article 31-9 (2) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "for profits above the standard prescribed by the Presidential Decree, the value before or after the change in the ownership shares or the value thereof." Article 31-9 (2) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the value of the gift tax shall apply mutatis mutandis."

① Articles 33 through 41-5 of the former Inheritance Tax and Gift Tax Act provide for an individual donation example clause, and Article 42 of the former Inheritance Tax and Gift Tax Act provides for the comprehensive donation example clause as “the donation of other profits”. The subordinate provision directly corresponding to Article 42 of the former Inheritance Tax and Gift Tax Act, which is a comprehensive donation example clause, is Article 31-9 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, using the same title title as “the donation of other profits.” Article 28 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is a provision for individual donation example of the merger, provides for the matters delegated under

② The main text of Article 42(1) of the former Inheritance Tax and Gift Tax Act provides that “for the benefit in question where the benefit has been acquired above the standard prescribed by Presidential Decree” shall be deemed as the value of donated property. In the latter part of subparagraph 3, “for the benefit in question, the benefit in question shall be determined by Presidential Decree before and after the change in the ownership shares or the value thereof.” In applying Article 42(7) of the former Inheritance Tax and Gift Tax Act, matters necessary for the method of calculating the difference in the appraisal of the relevant property before and after the change in the ownership shares or the value thereof shall be determined by Presidential Decree. According to delegation, Article 31-9(2)5 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides for the formula concerning the difference in the appraisal of the relevant property before and after the change in the ownership shares or the value thereof, the benefit above the standard prescribed by Presidential Decree shall be specified. As such, Article 31-9(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall be applied in preference to other provisions.

③ Article 31-9(2)5(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that “The phrase “the value calculated by applying mutatis mutandis the provisions of Articles 28 through 29-3 of the same Act.” The phrase “the value calculated by applying mutatis mutandis the provisions of Articles 28 through 29-3 of the same Act” is only specified as “the value of donated property”, and the phrase “the provision applicable mutatis mutandis to the phrase is not stipulated under Article 31-9(2)5(b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and if the phrase “the foregoing formula” is deemed as a whole, it is difficult to view the formula as “the foregoing formula itself is groundless and applicable mutatis mutandis.” Thus, Article 28(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act does not apply mutatis mutandis to the calculation of the value of donated property under Article 42(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.”

④ The phrase “cases where shares are changed” under Article 31-9(2)5(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act refers to cases where the number of shares owned is changed. In such cases, since the corporation that previously owned shares and the corporation that newly acquired shares is different from the corporation that newly acquired shares, it is difficult to determine whether the total number of shares issued is calculated by comparing the number of shares issued by all different corporations upon the application of subparagraph (a). Therefore, it is reasonable to deem that subparagraph (a) is applicable to cases where a corporation before or after capital transactions and the same share is changed, as in cases of a comprehensive share swap. On the other hand, the assessment can be sufficiently calculated by applying Article 31-9(2)5(b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act before and after comprehensive share swap.

B) Record date;

Comprehensively taking account of the following circumstances acknowledged as above and the purport of the entire pleadings, it is reasonable to view that BB and CCC’s share value should be assessed as of the date of share swap in the share swap in this case.

① 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 (Article 60(1) of the former Inheritance Tax and Gift Tax Act). Since the act of donation is terminated only when the right is finally transferred, in the case of share swap in this case, the date of share swap with the intention of transferring the right is the date of donation under Article 60(1) of the former Inheritance Tax and Gift Tax

② In calculating profits from a transfer at a low price and a high price of property, the basis date for calculating the price and the market price shall be the date of liquidation of the price of the relevant property. However, in cases where it is deemed unreasonable to set the base date for appraisal due to a sudden change in exchange rates after a sales contract, exceptions shall be made on the basis of the date of a sales contract (Article 26(8) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act), and in cases of a merger, the date of a report on the merger, etc. (Article 28(5)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act), and in cases of a reduction of capital, the date of a report on the merger, etc. (Article 29-2(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act). However, in cases of a comprehensive share swap,

③ The Plaintiff asserts that, when assessing the donation amount as of the date of share swap, the share value of the CCC increased from 5,174 to 15,950 won, the Plaintiff’s share value increases from 5,68,08,08,550 won to 17,534,536,800 won, thereby imposing gift tax. However, in view of the fact that a share swap contract is likely to change rapidly when a share swap contract is concluded, it is insufficient to deem that, in order to take the date of share swap as of the base date, the share swap contract, which is not the date of share swap, there is a sudden change between the date of share swap contract and the date of share swap, and further, there is no reason to change such change in circumstances.

C) Whether the value assessed by the DD Accounting Corporation can be viewed as the market price

Article 60 (2) of the former Inheritance Tax and Gift Tax Act provides that "The market price under paragraph (1) of the same Article shall be the price which is deemed to be normal in the event of free transaction between many and unspecified persons," and Paragraph (3) of the same Article provides that "if it is difficult to calculate the market price in the application of paragraph (1), the price shall be determined by the method under Articles 61 through 65 in consideration of the type, size, transaction

If the parties to a trade in an equal relationship calculates the exchange price through an appraisal by a specialized appraisal institution in accordance with the methods, procedures, etc. prescribed by the Securities and Exchange Act and other relevant Acts and subordinate statutes governing the comprehensive share swap and there is no error in the method of appraisal, such price may be deemed the market price reflecting the objective value at the time of the exchange of the relevant shares. However, if the appraisal is based on false data or is calculated without due consideration of the circumstances that should be considered, and the value or exchange ratio is considerably erroneous, the price based on such appraisal cannot be deemed the market price

As seen earlier, 188,657 won per share of BB assessed by the DD Accounting Corporation is an excessive appraised value due to lack of rationality and objectivity by simply based on the estimated sales amount presented by BB without objective data or by failing to properly consider the circumstances that are likely to be realized in light of the situation at the time. Thus, it cannot be deemed as the market price, since it cannot be deemed as the market price.

D) Whether a transaction example with ○○○ can be seen as a market price

The main text of Article 49(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "if there is a transactional act involving the pertinent property, the transactional value shall be included in the proviso thereof, and the transaction value shall be excluded if the transaction value is objectively unjust." Therefore, even in the case of unlisted stocks with less market value, if there is a transactional act involving unlisted stocks, the transaction value shall be deemed the market value in light of the transaction value and the stock value shall not be evaluated by supplementary method stipulated in the former Inheritance Tax and Gift Tax Act, and the market value shall not be evaluated by the supplementary method stipulated in the former Inheritance Tax and Gift Tax Act. However, in order to recognize such transactional act as the market value, the transaction price means the objective exchange price formed by the general and normal transaction, and the circumstances should be acknowledged that the relevant transaction concerned properly reflects the objective exchange value at the time of donation (see, e.g., Supreme Court Decisions 200Du1287, Jul. 28, 2000; 203Du4447, Nov. 26, 2004).

As seen earlier, the following circumstances, namely, ① the transaction of BB stocks between EE, etc. and ○○○○, etc., are transactions premised on the implementation of the instant exchange contract and the receipt of new stocks of the CCC. As such, it is difficult to consider BB stocks as comparative data to determine whether BB stocks have been appropriately evaluated at the time of the conclusion of the instant exchange contract; ② EE, etc. transfers BB stocks to ○○○ in special circumstances where BB’s bypass listing is promoted, the transaction value is deemed as “temporary and multiple transaction prices,” and it is difficult to view it as “the value deemed ordinarily established if BB stocks are freely traded between many and unspecified persons.” ③ E, etc., selling BB stocks to ○○○○○○, etc., and (3) the distribution method of excess profits generated at the time of sales to ○○○○○○○○○, etc., which is ordinarily difficult to find out from the purchase and sale of stocks at the time of the instant exchange contract, ④ the acquisition price of new stocks at the time of ○○○581.7 billion.

E) Value of donated property and political party tax

Accordingly, when calculating the value of donated property to the plaintiff pursuant to Article 31-9 (2) 5 (b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which applies to the share swap of this case, it shall be KRW 16,009,39,050 as follows:

However, the value of the donated property assessed by the Defendant prior to the change of the reason for disposal is less than KRW 16,009,399,050, as seen earlier, and thus, the amount of the pertinent disposition is within the scope of the legitimate tax amount.

4) Whether the principles of trust protection are violated or not

In general, in order to apply the principle of trust protection to the acts of tax authorities in tax and law relations, the tax authorities should name the public opinion list that is the subject of trust to taxpayers, and the taxpayer should not be responsible for the taxpayer's reliance on the tax authority's reliance on the reliance on the reliance of the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the tax authorities. The reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the reliance on the tax authority's

With respect to the instant case, it cannot be deemed that the Financial Supervisory Service received the evaluation statement after the revision, and it cannot be deemed that the tax authority expressed a public opinion that the share swap ratio is appropriate, and there is no other evidence to deem that the tax authority expressed such public opinion. Therefore, the above assertion on the premise that there is a public opinion expression by the tax authority to the effect that the share swap ratio is adequate, is without merit.

5) Sub-committee

Therefore, the instant disposition that the Defendant assessed the value of BB’s stock based on the supplementary evaluation method under the former Inheritance Tax and Gift Tax Act as of the date of the instant share swap and calculated the gains from the instant share swap.

3. Conclusion

Therefore, the plaintiff's claim shall be dismissed as it is without merit. The judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit.

Relevant statutes

(1) The former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007)

Article 35 (Donation, etc. of Profits Following Transfer of Low or High Price)

(1) When the relevant property is acquired or transferred to a person falling under any of the following subparagraphs, the amount equivalent to the difference between the price and the market price, which is determined by the Presidential Decree, shall be regarded as the value of donated

1. Where a person takes over property from a third person at a price lower than the market price, the transferee of such property;

2. In case where the property is transferred to another person at a price above the market price, the transferor of such property;

(2) In the application of the provisions of paragraph (1), where property is acquired or transferred between persons other than the specially related persons, an amount equivalent to the profits prescribed by the Presidential Decree shall be presumed to have been donated the difference between the price and the market price only when the property is acquired or transferred at a price significantly lower than the market price without any justifiable reason in light of transaction practices, and the amount equivalent to such profits shall

(3) Persons in a special relationship as referred to in paragraph (2), the scope of significantly low or high value shall be prescribed by Presidential Decree.

Article 42 (Donation, etc. of Other Profits)

(1) In addition to the donation under the provisions of Articles 33 through 41, 41-3 through 41-5, 44, and 45, in case where any profits falling under any of the following subparagraphs, and which are above the standards as prescribed by the Presidential Decree, are acquired, such profits shall be regarded as the value of donated property of the

3. Profits (including the amount of investment) or profits generated from transactions which increase or decrease the capital (including conversion, etc. of stocks) of a corporation, such as investment, reduction of capital, merger (including division and merger; hereafter the same shall apply in this Article), division, conversion, acquisition and exchange of stocks by convertible bonds, etc. under Article 40 (1), or transfer, acquisition and exchange of business, and exchange of corporations;

Profits accruing from a change of ownership shares or their value due to a change of organization, etc. In such cases, the relevant profits shall be the value obtained by subtracting the value of conversion, etc. from the value of stocks at the time of conversion, etc. in cases of conversion of stocks, etc., and in cases other than conversion, etc. of stocks, the appraised difference of ownership shares or

(3) In applying the provisions of paragraph (1), if it is deemed that there is a justifiable reason as a practice of transaction, the provisions shall not apply to persons other than those in special relationship.

Article 60 (Principles for Evaluation, etc.)

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (2))

(2) The market price under the provisions of paragraph (1) shall be the price which is deemed to have been normally effected where free transactions are conducted between many and unspecified persons and shall include the price which is recognized as the market price, such as the acceptance and public sale price and appraisal

(3) In the application of paragraph (1), where it is difficult to compute the market price, the price assessed according to the methods prescribed in Articles 61 through 65 shall be based on the type, scale, transaction conditions, etc. of the relevant property

(4) In applying paragraph (1), the value of the donated property added to the value of the inherited property pursuant to Article 13 shall be based on the market price as of the date of donation.

Article 63 (Appraisal of Securities, etc.)

(1) The appraisal of securities, etc. shall be made by the following methods:

1. Appraisal of stocks and investment shares:

(a) Stocks and equity shares traded with the Korea Stock Exchange shall be the average daily market price ( regardless of whether there is a transaction record) published every two months before and after the evaluation base date: Provided, That in cases where it is inappropriate to apply the average amount of the stocks and equity shares traded with the Korea Stock Exchange due to a cause of capital increase or merger, etc. during two months before and after the evaluation base date in calculating the average amount, the period calculated, as prescribed by Presidential Decree, between the two months before and after the evaluation base date;

on the basis of the average of such amounts.

(b) The provisions of item (a) shall apply mutatis mutandis to the stocks and equity shares as prescribed by the Presidential Decree from among the stocks and equity shares of the Association-registered corporations as prescribed by the Presidential Decree. In this case, the final market

(c) Stocks and equity shares not listed on the Korea Stock Exchange other than those under item (b) shall be appraised according to the methods prescribed by Presidential Decree in consideration of corporation assets and profits;

(1) Enforcement Decree of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008)

Article 28 (Calculation Method, etc. of Profits Following Merger)

(4) The difference of the appraised value under Article 38 (2) of the Act shall be determined by the following formula:

(The value under paragraph (3) 1 (a)-value under paragraph (3) 1 (b) 】 The number of stocks after the merger of the large shareholders of the merged party corporation whose stocks are excessively assessed.

Article 31-9 (Donation, etc. of Other Profits)

(2) The term “interest above the standard prescribed by the Presidential Decree” in other portion than each subparagraph of Article 42 (1) of the Act means the benefits calculated according to the following classification

4. In case of stock conversion, etc. from among the provisions of Article 42 (1) 3 of the Act: Relevant amount in case where the amount obtained by deducting the value of stock conversion, etc. from the value of stocks (referring to the value calculated under Article 30 (4) 1 and 2) as at the time of such conversion, etc

5. Other cases not falling under subparagraph 4 of Article 42 (1) of the Act: If the difference in the appraisal of the relevant property is 30/100 or more of the value of the relevant property before or after the change in the ownership shares or value thereof, or the amount thereof is not less than 300 million won, the difference in the appraisal concerned shall be calculated pursuant to the provisions of each of the following items:

(a) Where the equity shares are changed: (referring to the amount computed by applying mutatis mutandis the provisions of Articles 28 through 29-3) 】 (referring to the amount computed by applying mutatis mutandis the provisions of Articles 28 through 29-3) 】

(b) Where the appraised value is changed: Value before or after a change £­ Value after a change.

Article 49 (Principles for Evaluation, etc.)

(1) "Sale, appraisal, expropriation, and auction (referring to an auction under the Civil Execution Act; hereafter the same shall apply in this paragraph) during a period of not more than six months before or after the evaluation base date (three months in the case of donated property; hereafter the same shall apply in this paragraph) as prescribed by Presidential Decree, such as the expropriation and public auction price and appraisal price, etc. under Article 60 (2) of the Act.

In case of a public auction or sale (hereafter in this paragraph, referred to as the “sale, etc.”), it means the value confirmed under one of the following subparagraphs: Provided, That even if there are sale, etc. during the period not falling under the assessment period, if it is deemed that there are no special circumstances in view of price fluctuation in the management status, time elapsed, changes in surrounding environment, etc. of the company issuing stocks during the period falling under any of subparagraphs of paragraph (2) from the assessment date to the date falling under any of subparagraphs of paragraph (2), the relevant sale, etc. may be included in the value confirmed under one

1. If the fact of sale and purchase of the relevant property exists, the transaction value: Provided, That this shall not apply where the transaction value is deemed objectively unfair, such as transactions with persons with a special relationship provided for in Article 26 (4);

Article 52-2 (Evaluation of Stocks, etc. Traded by Korea Stock Exchange)

The average amount of periods calculated under the conditions as prescribed by the Presidential Decree in the proviso of Article 63 (1) 1 (a) of the Act means the average amount of periods calculated according to the following classifications:

1. Where a cause of capital increase or merger occurs before the evaluation base date, the period from the date following the date such cause occurs (where a cause of capital increase or merger occurs two times or more, referring to the date nearest to the evaluation base date; hereafter the same shall apply in this Article) to the date two months from the evaluation base date;

2. In cases of capital increase or merger after the evaluation base date, the period from two months before the evaluation base date to the day before the date when the same cause occurs;

3. In cases of capital increase or merger after the evaluation base date or before or after the evaluation base date, the period from the day after the date when the same cause occurs to the day before the evaluation base date before the date when the same cause occurs;

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and equity shares that are not listed on the Korea Stock Exchange (hereafter in this Article and Article 56-2, referred to as unlisted stocks) provided for in Article 63 (1) 1 (c) of the Act shall be the weighted average value of each share of the values appraised (hereinafter referred to as "net profit and loss value") by the following formula and the net asset value per share of each share, respectively: Provided, That in cases of a real estate-holding corporation (referring to a corporation falling under Article 158 (1) 1 (a) of the Enforcement Decree of the Income Tax Act), the ratio of the net value of profit and loss per share to the net asset value shall be 2 and

The value per share = The weighted average amount of net profits and losses per share for the latest three years ± the rate determined and publicly announced by the Commissioner of the National Tax Service in consideration of the circulation rate of three-year corporate bonds guaranteed by the financial institutions (hereinafter referred to as the “net profit and loss exchange rate

(2) The net asset value per share under paragraph (1) shall be the value appraised by the following formula:

The value per share = the net asset value of the corporation ± the net asset value of the corporation ± (hereinafter referred to as the “net asset value”).

(3) In applying the provisions of paragraphs (1) and (2), where a corporation that has issued stocks or investment shares under Article 63 (1) 1 (c) of the Act owns stocks or investment shares not exceeding 10/100 of the total number, etc. of outstanding stocks of a corporation that has issued other unlisted stocks, the assessment of such other unlisted stocks may be based on the acquisition price provided for in Article 74 (1) 1 (e) of the Enforcement Decree of the Corporate Tax Act, notwithstanding the provisions of

(4) In cases falling under any of the following subparagraphs, notwithstanding the provisions of paragraph (1), the net asset value under paragraph (2) shall be based on the net asset value:

1. Stocks or equity shares of a corporation whose business is deemed difficult to continue within the inheritance tax and gift tax under Articles 67 and 68 of the Act, or the liquidation procedures for the corporation subject to evaluation due to the death, etc. of the business operator; and

2. Stocks or investment shares of a corporation prior to the commencement of business, a corporation less than three years after the commencement of business, and a corporation under suspension or closure of business.

3. The total amount of losses which falls or will fall under each business year under the Corporate Tax Act continuously from the business year that ends within three years before the base date of appraisal, which ends on the stocks or equity shares of a corporation that has losses in excess of the total amount of earnings which falls or will fall under the business year concerned; and