When there is a gratuitous transfer of property, gift tax is generally levied under the Inheritance Tax Act. However, the Inheritance Tax Act contains provisions that deem or presume certain transactions as gifts by stipulating various specific cases in which gift tax may be imposed even when the transaction does not outwardly take the form of a gift, provided that its economic substance achieves the effect of a gift. These provisions serve as supplementary measures to achieve equitable taxation for special cases that do not constitute taxable transactions under the systematic framework of the Income Tax Act and the Inheritance Tax Act, which are grounded in the source theory of income. Disproportionate capital reduction—whereby a corporation reduces its capital in a manner that does not equally reduce all shareholders' ownership stakes—was relatively recently added to the deemed gift provisions under the Inheritance Tax Act, enabling the imposition of gift tax on benefits obtained by related-party major shareholders. This paper aims to provide an overview of gift tax objects and deemed gift provisions under the Inheritance Tax Act, analyze the economic effects of disproportionate capital reduction, and examine the validity of the deemed gift treatment, thereby reviewing the problems inherent in the current provisions of the Inheritance Tax Act on this matter. Additionally, the paper seeks to review the evolution of the tax authorities' position and taxpayer behavior leading up to the establishment of the deemed gift provision for this issue, thereby providing an occasion to reflect on the relationship between law and morality. Analysis of the wealth transfer effects of disproportionate capital reduction revealed a logical inconsistency in the current deemed gift provisions under the Inheritance Tax Act: when shareholders who are not in a special relationship also participate in the capital reduction, the taxable base of the gift tax imposed on major shareholders who do not participate in the reduction becomes larger than the amount of wealth actually transferred from related-party shareholders. Furthermore, it appears necessary to provide an exemption from the deemed gift provision for capital reductions conducted purely for capital preservation purposes without any gift intent, provided that the principle of shareholder equality is observed. The tax authorities' position regarding the taxability of disproportionate capital reduction has been unclear, causing confusion, and it is difficult to avoid the criticism that legislative efforts to resolve the issue have been inadequate. Meanwhile, taxpayers' behavior—in that they actively exploited gaps in the legal provisions as a means of aggressive tax management—cannot escape moral censure, and ultimately cannot be regarded as having complied with the law.