Father Who Inherited House Pays Off Debt... Son Receives 'Pre-sale Rights' After Corporate Funds Embezzlement

National Tax Service Investigation Reveals Various Gift Tax Evasion Cases... 1,822 Tax Audits Initiated
Unemployed University Student Receives High-Value Apartment, Owing Hundreds of Millions in Gift Tax

[Sejong=Asia Economy Reporter Kim Hyunjung] Mr. A received a gift from his father on the condition of assuming financial debts related to a high-priced apartment located in a speculative overheated district, reporting several hundred million won as debt. However, after the National Tax Service conducted post-debt management, it was found that the house was leased from his father, and the financial debt was repaid with the lease deposit. Later, the father moved out, and Mr. A himself moved in without returning the deposit, leading to allegations of disguised gifting against Mr. A.

Mr. B received a high-priced apartment in a speculative area as a gift from his father, who is a real estate rental business operator, and paid several hundred million won in gift tax and acquisition tax. However, Mr. B is a university student with no confirmed source of funds to pay the high taxes and housing holding costs. The National Tax Service plans to verify the source of funds, suspecting that Mr. B received the related funds through disguised gifting.

Mr. C, a young professional, received a house and apartment pre-sale rights as a gift from his father, who operates two large supermarkets. However, the father is suspected of illegally diverting corporate funds through sales omission and fictitious expense accounting to acquire the house and pre-sale rights by improper means. The National Tax Service is preparing for an integrated corporate tax audit and source of funds verification for the large supermarkets operated by the father.

Recently, as real estate prices have surged and holding and transaction taxes have been strengthened, cases of gifting real estate assets to children have increased. Correspondingly, cases suspected of illegal gifting and tax evasion are also rapidly increasing.

According to the Korea Real Estate Board, housing gifts reached a record high of 150,000 cases last year. Compared to 81,000 cases in 2016, this is nearly double. Especially, with 60,000 cases in the first half and 92,000 in the second half, the number has surged, prompting the National Tax Service to strengthen verification of related irregular tax evasion activities.

After analyzing the entire process from acquisition to gifting and thereafter of gifted houses, the National Tax Service selected 1,822 individuals for tax verification. These include: 1,176 individuals suspected of omitting the aggregation of other gifted properties while receiving gifts and double-reporting gift property deductions; 531 individuals who reported below market value or did not report by using official prices instead of market prices; 85 individuals suspected of insufficient source of funds related to house acquisition by the donor and their spouse; and 30 individuals suspected of repaying high rental deposits without their own funds or receiving disguised gifting for housing holding costs such as gift tax and acquisition tax after receiving a house as a burdened gift.

Beyond the cases listed above, irregular tax evasion allegations are diverse. Mrs. D, a housewife, reported that she inherited several hundred million won in deposit from a tenant living in an apartment gifted by her husband, but post-debt management revealed that after the gift, the lease contract changed from a key money lease to a monthly rent, and the husband repaid the deposit on her behalf.

Mr. E received dozens of shares issued by an unlisted company from his father as a gift and applied gift property deductions to report and pay gift tax. Later, he received a high-priced apartment as a gift from his mother and reported gift tax but did not aggregate the property value received from his father, thereby receiving duplicate gift property deductions.

A National Tax Service official stated, "We will continuously and thoroughly verify all tax evasion activities arising during the housing gift process to establish a culture of sincere reporting."

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