CJ Group Chairman Lee Jae-hyun Cancels Stock Gift to Two Children and Re-gifts Them

Stock Price Plummets Due to COVID-19 Crisis, Choosing Tax Savings

Cancellation of Gift of Approximately 1.84 Million Shares to Two Children and Re-gifting on the Next Day

[Asia Economy Reporter Lim Hye-sun] CJ Group Chairman Lee Jae-hyun changed the timing of his stock gift by canceling the gift to his two children and re-gifting it. It is analyzed that he chose tax savings as the stock price fell nearly 40% due to the COVID-19 outbreak after the initial gift, causing the gift amount to drop to a level similar to the gift tax.

CJ Group announced on the 2nd that Chairman Lee Jae-hyun canceled the gift of approximately 1.84 million new preferred shares given to Lee Kyung-hoo and Lee Sun-ho on December 9 last year, on the 31st of last month, and re-gifted them on the 1st of this month. Only the timing of the gift changed.

The value of the shares gifted by Chairman Lee to his two children was 65,400 KRW per share as of the initial gift date, December 9 last year, totaling 120.4 billion KRW, with 60.2 billion KRW per person. The gift tax, including a 20% premium for major shareholder share transfer based on the average stock price two months before and after the gift date, exceeds 70 billion KRW.

However, due to the stock price plunge caused by the COVID-19 crisis, the value of the gifted shares decreased to approximately 76.7 billion KRW based on the closing price on the 1st of this month. This is a 36% decrease compared to the initial gift, slightly higher than the gift tax amount.

According to the Inheritance and Gift Tax Act, the deadline for reporting the gift tax base is within three months from the last day of the month in which the gift occurred, and during this period, cancellation of the gift is possible by mutual agreement between the parties. Accordingly, CJ Group canceled the gift on March 31, the cancellation period, and decided to re-gift the next day.

CJ Group expects that if the stock price remains at the current level, the gift tax will be around 50 to 55 billion KRW. This is 15 to 20 billion KRW less than the initial gift tax of 70 billion KRW.