Selling a House to Your Son, Even with Payment, Might Still Be Considered a Gift! Tax Bureau Checks 'Where the House Money Came

Parents who want to transfer property to their children don't always do it through a direct 'gift.' Some families opt for a sales transaction. Suppose a father sells his house to his son for 10 million won, they sign a sales contract, and the son actually transfers 10 million won from his account to his father's. It seems like a legitimate sale with payment and title transfer. However, under current tax law, there's a rule for property transactions between close relatives that doesn't apply to unrelated buyers: the tax bureau doesn't just look at 'whether the money was transferred,' but also verifies 'where the funds for the property came from.' Why might selling a house to a son, even with payment, be considered a gift? The key lies in Article 5 of the "Estate and Gift Tax Act." According to current regulations, property sales between relatives within the second degree of kinship are generally treated as gifts. However, if the buyer can provide concrete proof of payment, and if this payment was not a loan from the seller to the buyer, nor borrowed from a third party with the seller as guarantor, then the transaction can be proven to be a genuine sale and not a gift. Therefore, when a father sells a house to his son, even if the son can present bank records showing the 10 million won transferred to the father's account, they must further prove that the source of these funds complies with the regulations. Can a son use his own salary or savings to buy his father's house? It's not automatically considered a gift when parents sell a house to their children. If the son genuinely has the financial capacity to purchase the property, for example, by using long-term accumulated salary, savings, investment income, or other personal assets to pay the property price,