When you sell a home you inherited in Korea, the cost basis for capital gains tax is not what anyone paid for it — it is the market value as of the date of death. Even if you owed no inheritance tax at all, whatever the property was valued at on that date is locked in as your basis. Families who skip filing because deductions reach 1 billion won leave the house recorded at its gongsi-gagyeok (government-assessed official price) rather than market value. Years later, the taxable gain is measured against that low figure.
The basis is fixed at the date-of-death valuation
Under the National Tax Service rules on valuing inherited property, an estate is valued at market value as of the date of death, with a supplementary method used only when market value cannot be established. For housing that supplementary figure is the official assessed price for apartments or detached homes — and it sits well below actual market prices.
That low figure shrinks inheritance tax, often to zero. A 500 million won lump-sum deduction plus a 500 million won spousal deduction leaves no taxable base up to 1 billion won. But the same figure later occupies the cost-basis slot in the capital gains calculation. Nothing was saved on inheritance tax, and capital gains tax rises — that is the whole mechanism. How the deduction combinations split is covered in the 500 million won lump-sum deduction and personal deduction thresholds.
The valuation window is six months before and after the date of death. A sale, appraisal, expropriation, court auction or public sale of the property inside that window sets the market value. Transactions outside it — within two years before death, or up to nine months after the filing deadline — may still be recognised through review by the property valuation committee.
What leaving it at the official price costs
Holding the sale price at 1 billion won and varying only the value reported at inheritance produces the following. Holding period is under three years, so no long-term holding deduction applies, and the one-house exemption does not apply. Figures deduct the 2.5 million won basic allowance, apply the standard rate schedule, and add the 10% local income surtax.
| Value reported at inheritance | Taxable gain | Tax base | Rate (progressive credit) | Total tax |
|---|---|---|---|---|
| 400m (official price) | 600m | 597.5m | 42% (35.94m) | 236.51m |
| 600m | 400m | 397.5m | 40% (25.94m) | 146.37m |
| 850m (appraised) | 150m | 147.5m | 35% (15.44m) | 39.80m |
| 1bn (sold within 6 months) | 0 | 0 | — | 0 |
The gap between leaving it at 400 million and reporting an 850 million appraisal is 196.71 million won. Raising the reported value by 450 million cut the gain by the same amount, and the tax base dropped two brackets, from 42% to 35%. A reported case in which a family with zero inheritance tax obtained an appraisal, filed anyway, and cut roughly 200 million won from their eventual capital gains bill follows exactly the structure of rows one and three above.
Owing zero inheritance tax does not mean there is nothing to file — it means there is a window in which the cost basis can be raised at no cost.
Raising the reported value is not always the right move. Once the estate exceeds the deduction ceiling, every won added to the valuation attracts inheritance tax immediately — 10% at the lowest bracket, 30% above a 500 million won base. Whether that beats the capital gains bracket, and whether the house will actually be sold, decides the answer. Acquisition tax also tracks the reported figure and belongs in the same calculation.
What counts as market value
Market value is not a number chosen at will; the qualifying forms are defined. Within the valuation window, the following are recognised.
| Type | Recognised value | Condition |
|---|---|---|
| Sale | Contract price | Excludes related-party and otherwise improper transactions |
| Appraisal | Average of two or more appraisal firms | One firm allowed if official price is 1bn won or less |
| Expropriation / auction / public sale | The determined price | Decided within the window |
| Comparable sale | Sale price of a similar unit in the same complex | Similar floor area and official price |
| No market value | Official apartment or house price | Supplementary method |
Apartments usually have comparable sales in the same complex with similar size and assessed value, so a comparable price is often available. Detached houses, retail units and land rarely do, and default to the official price. Those are the cases where an appraisal pays.
Selling within six months of death simplifies everything. That sale price becomes the estate valuation, so basis and sale price match and the taxable gain is zero — the last row of the table.
A later appraisal cannot undo it
Once the estate has been filed at the official price — or not filed at all — obtaining a retroactive appraisal near the time of sale to raise the basis is closed off. A February 2020 amendment to the Income Tax Act Enforcement Decree aligned the cost basis with the value determined under inheritance and gift tax law at the time of death, and subsequent rulings have declined to recognise retroactive appraisals.
The mechanism cuts the other way too. Report a property with a clear market price at its low official value, and the tax authority may commission its own appraisal, raising the valuation and the inheritance tax with it. The National Tax Service selects appraisal targets by the gap between reported and appraised values, and that threshold has been moving downward. Establishing a defensible market value at filing is what makes the outcome predictable.
What to check
If a house has been inherited or is expected to be, work through these in order.
- The exact date of death — it starts the six-month window and sets the deadline for obtaining an appraisal.
- Comparable sales in the same complex — for an apartment, a comparable price is likely to govern instead of the official price.
- Distance between estate total and the deduction ceiling — 500 million won, or 1 billion with a surviving spouse. Inside the ceiling, raising the valuation adds no inheritance tax.
- Whether and when the house will be sold — for a property to be held indefinitely, raising the basis matters less.
- Number of appraisal firms — above a 1 billion won official price, an average of two or more is required.
- Whether the one-house exemption applies — if it does, the table above no longer describes the outcome. The criteria are in the one-house exemption requirements and the 1.2 billion won threshold.
- Acquisition tax base — it follows the reported inheritance value, so include it in the same calculation.