Abstract

In－kind contribution has simultaneously the character of capital transactions and profit and losstransaction. The current corporate income tax that regulates proceeds of property transferred by in－kind contribution as the market value of shares acquired by in－kind contribution. Therefore,calculation of the proceeds of property requires a supplementary assessment procedures underInheritance and gift tax law which is complex and needs a lot of data. Though rejection of unfair act and calculation under corporate income tax is applied on ainvestor who makes an investment in kind lower than market price in respect to profit and losstransaction, rejection of unfair act and calculation related to capital transaction is applied to theinvestor at the same time. This makes a tax unfairness between paid－in capital increase in cashand in－kind contribution. This paper characterizes in－kind contribution as dual transaction thatconsists of selling a property in cash and paid－in capital increase of the cash, considering that thepurpose of permitting payment of property in addition to cash in capital increase in business lawis to remove procedural discomfort that investor sells property in cash and pays the cash if capitalincrease allows only cash payment, in－kind contribution involving capital increase procedure isnot regarded as an exchange of property and share and Corporate income tax regulates increase ofnet asset as a taxable income. The prospect of dual procedure of in－kind contribution accounts for profit and loss transactionthat investor sells a property in appraisal price agreed between investor and corporation tocorporation, and capital transaction that investor pays the cash. In that case, the criteria whether In－kind contribution has simultaneously the character of capital transactions and profit and losstransaction. The current corporate income tax that regulates proceeds of property transferred by in－kind contribution as the market value of shares acquired by in－kind contribution. Therefore,calculation of the proceeds of property requires a supplementary assessment procedures underInheritance and gift tax law which is complex and needs a lot of data. Though rejection of unfair act and calculation under corporate income tax is applied on ainvestor who makes an investment in kind lower than market price in respect to profit and losstransaction, rejection of unfair act and calculation related to capital transaction is applied to theinvestor at the same time. This makes a tax unfairness between paid－in capital increase in cashand in－kind contribution. This paper characterizes in－kind contribution as dual transaction thatconsists of selling a property in cash and paid－in capital increase of the cash, considering that thepurpose of permitting payment of property in addition to cash in capital increase in business lawis to remove procedural discomfort that investor sells property in cash and pays the cash if capitalincrease allows only cash payment, in－kind contribution involving capital increase procedure isnot regarded as an exchange of property and share and Corporate income tax regulates increase ofnet asset as a taxable income. The prospect of dual procedure of in－kind contribution accounts for profit and loss transactionthat investor sells a property in appraisal price agreed between investor and corporation tocorporation, and capital transaction that investor pays the cash. In that case, the criteria whether investor sells a property in market price should be the issue prices of stocks of criteria ofrejection of unfair act and calculation in relation to capital transaction. This paper suggests arevision of a regulation related to in－kind contribution that proceeds of the transferred propertyfrom in－kind contribution is the issue prices of stocks, resulting in easiness of application ofregulation related to in－kind contribution.

Keywords

• in－kind contribution
• rejection of unfair act and calculation
• capital transaction
• issue price

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