"I Gave It Because My Grandchild Is So Precious"—What to Watch Out for When Giving Grandchildren Chuseok Pocket Money

[Financial News] Even holiday pocket money may be subject to taxation if a large lump sum exceeding generally accepted social norms is given, or if pocket money received by children or grandchildren is accumulated and used to acquire stocks or real estate, as it may be deemed a gift under tax law.
According to the National Tax Service (NTS), the Inheritance and Gift Tax Act classifies living expenses, education expenses, hospital bills and congratulatory gifts that are generally accepted under social norms as tax-exempt property.
Chuseok pocket money may also be tax-exempt if it is spent as actual pocket money at an ordinary level. 
However, if it is not spent as pocket money but deposited in an account and used to build assets such as stocks or real estate, it may be treated as gifted property rather than pocket money. 
For money received by minor children or grandchildren from lineal ascendants such as parents or grandparents, a gift-tax exemption applies to a combined total of up to 20 million won over 10 years. The limit is 50 million won for adults.
Taxes may also be imposed when parents generate investment profits through frequent trading using an account in their child's name. Because the child's assets may be considered to have increased through the parents' contribution, the entire profit may be recognized as an additional gift.
It is also important to note that when grandparents skip the parents' generation and give gifts directly to their grandchildren, a generation-skipping gift tax surcharge applies, adding 30% of the calculated tax amount.
[email protected] Seong Min-seo Reporter