Tax Investigation on 85 Individuals Accused of Illicit Gifting Using 'Bumochance' Pre-sale Rights and Debts

[Asia Economy Reporter Kwangho Lee] #Case 1= Minor A, who works at mother B’s business with minimal income, acquired a high-priced APT pre-sale right with a large premium and paid the intermediate and final payments to obtain the APT. The National Tax Service confirmed that B paid the pre-sale right purchase price of ? billion won and the remaining pre-sale payment of ? billion won on A’s behalf and launched an investigation into the omission of gift tax reporting.

#Case 2= In his 30s, minor C acquired a commercial building (○○ billion won) and repaid a mortgage debt of ○ billion won that he assumed. Considering son C’s age, income, and financial status, it is difficult to recognize that he repaid the debt on his own, and it is suspected that his wealthy mother D repaid it on his behalf. The National Tax Service plans to investigate the allegation that mother D received a gift of the repaid debt and interest of ○ billion won.

The National Tax Service has identified multiple suspects who used the so-called ‘parent chance’ to evade gift tax and other taxes through pre-sale right transactions or real estate sales and gift processes by reporting debts fraudulently, and has launched tax investigations.

According to the National Tax Service on the 17th, the investigation targets include 46 suspects of evasion in pre-sale right transactions and 39 suspects of irregular gift using debts, totaling 85 people.

From a tax perspective, these include ▲suspects who evaded gift tax by having parents pay the intermediate payments after children acquired pre-sale rights ▲suspects who wrote contracts for pre-sale right sales at prices lower than the actual transaction amount or failed to report pre-sale right transfers to evade capital gains tax ▲suspects who transferred pre-sale rights to related parties at prices below market value to evade gift tax.

Also included are ▲suspects who evaded gift tax by having parents repay children’s debts ▲suspects who evaded gift tax by borrowing funds from parents and then having the debt forgiven ▲suspects who evaded gift tax by preparing false loan contracts.

Kim Tae-ho, Director of the Asset Taxation Bureau at the National Tax Service, said, “When pre-sale rights are acquired under the names of children or others, or when a down contract is written, or when false loan contracts are made between related parties, it is common to align contract details with financial transaction records to disguise the transaction as legitimate.” He added, “Therefore, we plan to verify the appropriateness of transaction amounts and actual borrowing by checking transaction details between accounts through financial tracking investigations and using data from the Financial Intelligence Unit (FIU) to meticulously trace cash flows and focus on reviewing financial transaction details.”

He continued, “Regarding loans from related parties, we will thoroughly verify not only the lending of funds but also actual interest payments and, if necessary, the cash flow and funding capacity of relatives who lent the funds. If the acquired pre-sale rights or lent funds originate from business fund outflows or there is suspicion of business income evasion, we will expand the investigation scope to related businesses for verification.”

He also emphasized, “If violations of real estate transaction laws such as name trusts are confirmed during the investigation, we will promptly notify relevant agencies. In cases where false contracts such as down contracts are prepared, both the transferor and transferee will be excluded from tax exemptions or reductions upon real estate sales according to Article 91 of the Income Tax Act. If tax evasion is confirmed through fraud or other illegal methods, measures will be taken under the Tax Crime Punishment Act.”

Director Kim stated, “Going forward, the National Tax Service will further strengthen information collection on irregular tax evasion in real estate transactions and strictly verify the entire process of real estate transactions.”

This content was produced with the assistance of AI translation services.