Actor Yoon Tae-young Wins Partial Victory in Father's Stock Gift Tax Lawsuit

Actor Yoon Tae-young (49) partially won a first-instance lawsuit challenging the tax authorities' imposition of gift tax on stocks worth around 3 billion KRW gifted by his father.

According to the legal community on the 5th, the Seoul Administrative Court Administrative Division 2 (Presiding Judge Shin Myung-hee) recently ruled in favor of Yoon in part in the lawsuit to cancel the gift tax imposition filed against the Seoul Gangnam Tax Office, ordering the cancellation of 5.44 million KRW in additional penalties out of the 95.84 million KRW in additional gift tax.

Yoon Tae-young [Image source=Yonhap News]

Earlier, in September 2019, Yoon inherited 400,000 shares of the unlisted real estate rental company A from his father. At the end of the same year, he assessed the value of A's shares at 3.1668 billion KRW and reported and paid the related gift tax.

However, the tax authorities pointed out that the stock value should increase by 180.8 million KRW, believing that A's asset value was higher than Yoon's calculation.

They imposed gift tax of 90.4 million KRW on the increased amount, along with a penalty of 5.44 million KRW for the taxpayer's violation of obligations.

Yoon filed an administrative lawsuit. During the trial, the evaluation method for the stock value of four other unlisted companies held by A became a key issue. Yoon based his valuation on the 'book value' shown on each company's financial statements, but the tax authorities argued that using the acquisition cost as the basis would increase A's asset value further.

Seoul Administrative Court, Seocho-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

The first-instance court ruled that, contrary to the tax authorities' interpretation, the 'book value' standard should be based on acquisition cost rather than the accounting book value. The court stated, "If interpreted as accounting book value, the result would vary depending on the accounting policies and estimates adopted by the company," adding, "This raises significant concerns regarding tax equity."

However, the court found it unjust to impose the penalty on Yoon. This was considering that until June 2019, just before Yoon filed the gift tax report, the tax authorities issued official interpretations using both the terms book value and acquisition cost, causing confusion.

The court added, "There was a legitimate reason that Yoon could not be held responsible for not knowing his obligations due to conflicting interpretations of tax law."

Both Yoon and the tax authorities appealed the first-instance ruling.