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5. Gains

a. Gains

Gains denote income and profit from transactions that increase the net value of the

assets of a corporation except for paid-in capital and other related activities as

prescribed in the Corporation Tax Law.

(1) Income from profit-making businesses excluding sales returns and discounts

(2) Gains from asset (including treasury stocks) transactions

(3) Receipts from asset leasing

(4) Dividends or distributions receivable

(a)  An amount, in excess of the amount necessary to acquire stocks or investment

receivable by investors as a result of effacement of stocks, decrease of capital

(b) The value of stocks or investment acquired by transferring surplus or reserves

into capital with the following exceptions:

i)  transferring paid-in capital over par into capital;

ii)  transferring surplus from consolidation or merger into capital;

iii) transferring gains on retirement of treasury stock (the market value of treasury

stock shall not exceed the price paid to acquire the treasury stock) into capital

two years after the retirement; or

iv)  transferring asset revaluation reserve into capital.

(c)  An amount exceeding the price paid to acquire stocks or investment receivable

by investors through the distribution of residual property caused by the dissolution of

a corporation

(d)  An amount exceeding the price paid to acquire stocks or investment of the

extinguished corporation due to a merger or consolidation with a newly established

or existing corporation

(e)  An amount exceeding the price paid to acquire stocks or investment of the

divided corporation due to the division of corporation

(5) Gains from revaluation of assets

(6) Value of assets receivable without compensation, excluding any portion used to

cover carried-over losses

(7) Decreased amount of liabilities by exemption or lapse of debts, excluding the portion

used to make up for carried-over losses

(8) An amount of disbursed loss that has been returned

(9) An amount of reserves set aside with losses and not by means of appropriating profit

(10) Gains received from related parties

(11) An amount of tax-free reserves in excess of the prescribed limit under the law

(12) An amount of non-designated donations and designated donations in excess of the

prescribed limit under the law

(13) An amount of entertainment expenses in excess of the prescribed limit under the law

(14) Other income which has been, or is to be vested in the corporation

b. Non-inclusion of Gains

Gains enumerated below are not counted as gains for the respective business year in

the calculation of income.

(1) An amount in excess of the face value of stocks issued

(2) Profits from capital reduction

(3) Profits from mergers, excluding those from revaluated gains from mergers prescribed

by the relevant Presidential Decree

(4) Profits from division, excluding revaluated gains from corporate division prescribed

by the relevant Presidential Decree

(5) Profits carried over

(6) Revaluation balance under the Asset Revaluation Law, except when a 1% tax rate is

levied on revaluation

(7) An amount of corporation tax or inhabitant tax refundable used for the payment of

other tax liabilities

(8) Interest on the refund of erroneously paid national taxes or local taxes

(9) The value of assets received without compensation and an amount of liabilities

decreased due to exemption or lapse of debts, used for balancing deficits carried-over

(10) 90% of the amount of dividends received by institutional investors from corporations

under certain conditions in compliance with the Presidential Decree

(11) The output tax amount under the Value Added Tax Law.