Cost basis of split-off company shares after a qualifying equity split

1. 01Question

   Where a shareholder acquired shares of a newly established company in an equity split meeting the conditions of Article 46(1)(i) and (ii) of the former Corporate Tax Act, and was not taxed on a deemed dividend for that acquisition, is the cost basis for computing the capital gain on a later transfer of those shares, calculated by standard price, the standard price of the shares of the company that underwent the split at the time the shareholder acquired those shares?

2. 02Holding

   Yes, unless there are special circumstances. The Court held that the tax-deferral rules for a company split support restructuring where the substance of the interest in the enterprise does not change, and that the deferral only postpones the capital gain to the transfer of the new shares rather than excluding it from income tax for good. Measuring the cost basis by the standard price of the newly established company's shares at the moment of acquisition would leave a gap of untaxed capital gain, so the standard price of the shares of the company that underwent the split when the shareholder acquired those shares must be used.

   Summary of the holding, verbatim

   분할법인의 주주가 구 법인세법 제46조 제1항 제1호 및 제2호의 요건을 갖춘 인적분할로 취득한 분할신설법인 주식을 양도하여 발생한 양도차익을 기준시가에 의해 계산함에 있어, 위 분할신설법인 주식의 취득에 관하여 의제배당으로 과세가 이루어지지 않은 경우, 그 취득가액은 특별한 사정이 없는 한 분할법인의 주식을 취득하였을 당시 해당 분할법인 주식의 기준시가로 봄이 상당하다.

   Unofficial English translation

   In calculating, on the basis of the standard value, the capital gain arising from a transfer of shares of a newly incorporated corporation acquired by a shareholder of a dividing corporation through a spin-off satisfying the requirements of Article 46 (1) 1 and 2 of the former Corporate Tax Act, where no taxation is imposed as a deemed dividend with respect to the acquisition of the shares of the newly incorporated corporation, it is reasonable to regard the acquisition cost thereof as the standard value of the shares of the dividing corporation at the time when the shares of the dividing corporation were acquired, unless there are special circumstances.

3. 03Disposition

   Dismissed Stated in the decision

   상고를 모두 기각한다. 상고비용은 원고들이 부담한다.

   Unofficial English translation

   All appeals are dismissed. The appeal costs shall be borne by the plaintiffs.

4. 04Form of the test

   Elements stated Stated in the decision

   그 취득가액은 특별한 사정이 없는 한 분할법인의 주식을 취득하였을 당시 해당 분할법인 주식의 기준시가로 봄이 상당하다.

   Unofficial English translation

   it is reasonable to regard the acquisition cost thereof as the standard value of the shares of the dividing corporation at the time when the shares of the dividing corporation were acquired, unless there are special circumstances.

5. 05Factors

   • 회사분할에 대한 과세이연 규정은 1998. 12. 28. 법인세법 전부 개정으로 합병·분할 등 기업조직재편 세제를 도입할 때 마련된 것으로서
   • 지분 관계를 비롯하여 기업의 실질적인 이해관계에는 변동이 없는 때에는, 이를 과세의 계기로 삼지 않음으로써
   • 구 법인세법 제46조 제1항 제1호 및 제2호의 요건을 갖춘 인적분할로 취득한 분할신설법인 주식을 양도하여 발생한 양도차익을 기준시가에 의해 계산함에 있어
   • 위 분할신설법인 주식의 취득에 관하여 의제배당으로 과세가 이루어지지 않은 경우

   Unofficial English translation

   • The tax deferral provisions on corporate division were enacted when the tax system for the reorganization of corporate structure, such as mergers and divisions, was introduced by the complete revision of the Corporate Tax Act on December 28, 1998, and

   • where there is no change in the substantive interests of the enterprise, including shareholding relationships, thereby not taking it as an occasion for taxation

   • In calculating, on the basis of the standard value, the capital gain arising from a transfer of shares of a newly incorporated corporation acquired through a spin-off satisfying the requirements of Article 46 (1) 1 and 2 of the former Corporate Tax Act,

   • where no taxation is imposed as a deemed dividend with respect to the acquisition of the shares of the newly incorporated corporation

6. 06Relation to precedent

   Follows earlier decisions Stated in the decision

   대법원 2013. 1. 17. 선고 2011다83431 전원합의체 판결(공2013상, 329), 대법원 2022. 10. 27. 선고 2022두44354 판결(공2022하, 2324)

   Unofficial English translation

   Supreme Court en banc judgment 2011Da83431 decided January 17, 2013 (Gong 2013 Sang, 329); Supreme Court judgment 2022Du44354 decided October 27, 2022 (Gong 2022 Ha, 2324)

   Decisions referred to

   [1] 대법원 2013. 1. 17. 선고 2011다83431 전원합의체 판결(공2013상, 329), 대법원 2022. 10. 27. 선고 2022두44354 판결(공2022하, 2324) / [2] 대법원 2018. 10. 25. 선고 2018두42184 판결(공2018하, 2281)

7. 07Burden of proof

   Not addressed Not in the decision

8. 08Open question and revisit condition

   What special circumstances would displace the standard price of the splitting company's shares as the cost basis of the new shares?

   An amendment to Article 46 of the Corporate Tax Act or to Article 27 of the Enforcement Decree of the Income Tax Act on valuing the consideration for a split would require this entry to be read again. A later decision that finds special circumstances displacing the rule, or that settles how the split ratio is applied to the standard price, would change this reading.

Read 2026-10-24 · Cross-read 2026-10-24. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.

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