Regarding recent expansion of the family-owned business deduction (“FBD” hereafter) in the Inheritance and Gift Tax Act, this study analyzes inheritance taxation in various countries and discusses the problems and improvement plans of current Korean inheritance taxation. Most countries have shown a tendency to decrease inheritance tax burdens by abandoning itself, converting to capital gains tax, lowering its tax rates and providing tax benefits for inherited business property, whereas Korean inheritance taxation hardly keeps up with the tendency due to high tax rates and strict tax brackets as well as the “estate tax” feature. Even considering recent expansion of FBD, tax benefits for inherited business property are still regarded as insufficient compared with those enacted in other countries, which is also supported by analysis with a specific case on FBD. Consequently, regarding future inheritance tax reform, the taxing authorities should recognize that overloaded inheritance tax burdens could be an obstacle to family business inheritance with preventing upbringing long-lived companies and, as a result, inducing outflow of national wealth., and that, on the contrary, constant growth of companies through soft business inheritance could ultimately contribute to national economy by creating investments and employments. Based on above arguments, practical plans to revise tax laws for soft business inheritance, specifically for small-and-mid sized firms, include relieving regulations on FBD through reducing minimum operating period and increasing deduction rates, lowering inheritance tax rates, broadening inheritance tax bases and converting the type of inheritance taxation to adopt “inheritance tax” feature. Such revision in tax laws could make acquisition of capital investment stable to improve the efficiency of national economy and, as a result, to increase long-term tax revenues, besides to strengthen the international competitive power of Korean companies.