2.1 Billion Corporate Apartment Purchase with 'Appa Chance'... 276 Suspicious Direct Transactions Suspected of Illegality

'Highest' with 214 Reported Violations
Planned Investigation into Market Manipulation from March

[Asia Economy Reporter Noh Kyung-jo] #. Mr. A purchased an apartment under the name of a corporation represented by his father for 2.1 billion KRW. He financed the purchase with an existing jeonse deposit of 850 million KRW and 1.25 billion KRW gifted from his father. However, the Ministry of Land, Infrastructure and Transport's investigation found no records of the transfer of the jeonse deposit between the parties involved in the sale or the corporation's bookkeeping entries. Consequently, the case was reported to the National Tax Service on suspicion of corporate fund misappropriation and disguised gifting. The National Tax Service plans to conduct a tax audit to verify the source of funds and the appropriateness of accounting treatment, and to recover evaded taxes.

View of apartments from the 63 Square Observatory in Yeouido, Seoul / Photo by Yonhap News

On the 23rd, the Ministry of Land, Infrastructure and Transport announced that it had uncovered 276 suspicious illegal transactions (disguised gifting, name trusts, etc.) from its investigation of high- and low-priced direct apartment transactions nationwide. This investigation targeted 802 selected abnormal real estate direct transactions conducted from January 2021 to August of last year.

The Ministry notified the National Tax Service, the National Police Agency, the Financial Services Commission, and local governments of these cases to ensure that confirmed violations result in tax evasion recovery, loan recalls, and imposition of fines. Additional investigations will be conducted from next month on apartment direct transactions occurring since September of last year.

Analysis of suspicious illegal transactions showed that false reporting of contract dates and transaction amounts was the most frequent violation with 214 cases. Notifications to the National Tax Service for disguised gifting and loan transactions between related parties numbered 77 cases, notifications to the National Police Agency for name trusts numbered 19 cases, and notifications to the Financial Services Commission for misuse beyond loan purposes totaled 18 cases.

Examples included cases where a 10-year public rental apartment, which cannot be subleased, was subleased and then ownership was transferred via direct transaction at the time of conversion to sale, and cases where an apartment was purchased with funds provided by the seller’s former sister-in-law and ownership was transferred again four months later.

The Ministry regards illegal subleasing of public rental apartments as a violation of the Public Housing Special Act and has requested police investigations. Local governments were notified of violations of the transaction reporting law. If found guilty of violating the Public Housing Special Act, offenders may face imprisonment of up to three years or fines up to 30 million KRW.

Additionally, the Ministry will conduct a planned investigation over five months starting next month. The investigation will focus on transactions from January 2021 to February last year that were canceled after a long period or repeatedly reported at high prices by specific individuals and then canceled.

Won Hee-ryong, Minister of Land, Infrastructure and Transport, stated, "Using high- and low-priced direct transactions as means for disguised gifting or name trusts distorts market prices amid transaction stagnation, causing market instability and other side effects. We will strictly manage such illegal activities."

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