When a parent hands a home to a child and the child takes over the lease deposit or mortgage on it, Korea calls it a gift with assumed debt (burden gift). Income Tax Act Article 88(1) says the part equal to the debt the recipient takes on is treated as a transfer. One gift splits into a gift part and a sale part. How are the sale price and cost of the sale part set? Decree Article 159 gives the formulas, set out here as a calculator.
1. Only the debt share counts as a sale (Act Art. 88(1)).
2. Sale price and cost are both scaled by debt ÷ gift value (Decree Art. 159(1)).
3. KRW 1bn home, 400m deposit, bought by the donor for 500m — sale price 400m, cost 200m, gain 200m (our example).
Calculator
Updates as you type. Amounts in KRW millions. Sale price and cost are both scaled by debt ÷ gift value (Decree Art. 159(1)). If the gift value is a standard value, enter the donor’s cost as a standard value too. Other expenses, the long-term holding deduction and rates are not included; between spouses or parents and children some debt may be presumed not taken on.
The provisions
| Type | What the source says | Worth noting (ours) |
|---|---|---|
| Income Tax Act Art. 88(1) | A transfer is a transfer of an asset for value. The part equal to the debt borne by the recipient in a burden gift is treated as a transfer, … | One gift becomes gift plus sale |
| Decree Art. 159(1)1 | Cost = A × B ÷ C — A: the amount under Act Art. 97(1)1 (if the sale price uses standard value, cost uses standard value too), B: debt, C: gift value | The donor’s cost, scaled by the debt share |
| Decree Art. 159(1)2 | Sale price = A × B ÷ C — A: value under Inheritance and Gift Tax Act Arts. 60–66, B: debt, C: gift value | If value = gift value, sale price = debt (ours) |
| Decree Art. 159(2) | Where taxable and non-taxable assets are gifted together, debt = total debt × taxable asset value ÷ total gifted assets | Split the debt by asset first |
The formulas appear on the law database as images; the table spells them out. “A” means different things in the two: the donor’s original cost in the cost formula, the value at the time of the gift in the sale-price formula.
Three sums — our example
| Case (our example) | Sale part | Worth noting (ours) |
|---|---|---|
| KRW 1bn home, 400m deposit taken on, donor’s cost 500m | Sale 400m · cost 200m · gain 200m | Debt share 40%; 600m stays a gift |
| 600m home + 300m non-taxable asset, total debt 300m, cost 300m | Debt on the home 200m · sale 200m · cost 100m · gain 100m | 300m × 6 ÷ 9 = 200m (para. 2) |
| 500m home, debt 200m, cost 600m | Sale 200m · cost 240m · loss 40m | Gifting below cost makes the sale part a loss |
The first row: 400m debt ÷ 1bn gift = 0.4. Sale price 1bn × 0.4 = 400m, cost 500m × 0.4 = 200m, gain 200m; the other 600m stays a gift. The sale part is the donor’s capital gains, the gift part the recipient’s gift tax — that split is our reading of Article 88 treating the debt part as a transfer, so check with the tax office before filing.
What the calculator leaves out
- Other expenses — Article 159 only sets cost and sale price; how other expenses are split isn’t in it.
- Holding deduction, rates, one-home exemption — it stops at the gain. Carry on with the capital gains tax calculator (our pointer).
- Family debt presumption — between spouses or parents and children some debt may be presumed not taken on; see gift with assumed debt.
Checklist
- ☐ The debt taken on (deposit, mortgage) is in the deed
- ☐ Market or standard value — use the same basis for cost
- ☐ Non-taxable assets gifted too? Split the debt first (para. 2)
- ☐ Papers proving the donor’s cost
Questions that remain
Who pays tax on the sale part?
Article 88 treats the debt part as a transfer, which reads as the donor’s capital gains tax (our reading). The gift part is the recipient’s gift tax.
What if the debt is larger than the gift value?
The calculator stops. Article 159 doesn’t deal with that case.
How is rounding done?
The provisions don’t say; the calculator rounds in the input unit (our method).
Sources
- Korean law database (law.go.kr) — Income Tax Act Enforcement Decree Art. 159 — source (current text, effective 1 October 2026, Decree No. 36737; checked 22 October 2026). Para. 1 item 1 cost = A × B ÷ C (standard-value link), item 2 sale price = A × B ÷ C, para. 2 debt split — formulas read from image alt text.
- Korean law database — Income Tax Act Art. 88(1) — source (current text, effective 1 July 2026, Act No. 21221; checked 22 October 2026). The debt part of a burden gift is treated as a transfer.
- Not read. How other expenses are split; Decree Art. 151(3) (not reopened this time — see gift with assumed debt); rulings.
- What we added. The “worth noting” column and the Korean everyday gloss.
Where to check further
- Your tax office or Hometax — gift tax and capital gains filings together.
Written on 22 October 2026. The content is from the source; the glosses are ours.
