Exclusive
Three Children of Former Hankook Tire Advisor Cho Hyun-sik Sell Yongin Land Gifted by Honorary Chairman Cho Yang-rai

[비즈한국] It has been confirmed through Bizhankook's coverage that the three children of Cho Hyun-sik, former advisor at Hankook & Company000240, recently sold land in Yongin, which was gifted to them by their grandfather, Hankook & Company Honorary Chairman Cho Yang-rai, for approximately 4.9 billion won. In 2022, after Honorary Chairman Cho Yang-rai transferred his stake in the group's holding company to his younger son, Chairman Cho Hyun-bum, the former advisor, along with his other siblings, filed for a limited guardianship adjudication against their father, leading to an ongoing management dispute. Since the filing for limited guardianship, the Honorary Chairman has been gifting real estate he holds to his grandchildren.

According to the industry and the real estate register, the three children of former advisor Cho Hyun-sik sold 11,703㎡ of forest land in Singal-dong, Giheung-gu, Yongin-si, Gyeonggi-do, which they owned jointly (one-third share each), to a real estate development firm and a real estate consultancy on the 19th of last month. The total sale price was 4.94 billion won. The proceeds returned to the three children are estimated to be approximately 1.6 billion won each. The three children of the former advisor are 21, 18, and 11 years old, respectively, meaning two of them are minors. The land sold is located near Taekwang CC and is currently heavily wooded.

Former advisor Cho Hyun-sik's three children received this land as a gift from their grandfather, Honorary Chairman Cho Yang-rai, two years ago. The Honorary Chairman purchased the land in the Singal-dong area in June 1971 and held it for some 50 years before gifting a portion of it to his eldest son's three children in August 2022. On the day the grandchildren sold this land, the Honorary Chairman also sold 1,599㎡ of nearby land he owned for 1.41 billion won. The buyer was the same real estate development firm and its CEO that purchased the grandchildren's land.

The proceeds from the sale of the Yongin land by former advisor Cho Hyun-sik's children are expected to be used for tax payments. Currently, the Nine One Hannam apartment in Yongsan-gu, Seoul, owned by former advisor Cho Hyun-sik and his wife, is pledged as collateral for the tax payments of the three children and his wife, Ms. Cha. The collateral mortgages set on the property for tax purposes are divided by debtor: three entries for the first child (maximum bond amount of 928.01 million won), three for the second child (940.31 million won), three for the third child (1.03773 billion won), and one for Ms. Cha (603 million won). Given the ages of the three children, the tax arrears are presumed to be gift taxes.

This is not the only real estate property Honorary Chairman Cho Yang-rai has gifted to his grandchildren. In May 2021, the Honorary Chairman gifted a commercial building located in Euljiro 3-ga, Jung-gu, Seoul, to the son of his second son, Hankook & Company Chairman Cho Hyun-bum (Related Article: [Exclusive] Honorary Chairman Cho Yang-rai, Facing Mental Competency Evaluation, Gifts 16.9 Billion Won Commercial Building to Minor Grandson). The grandson, who was a minor, sold the building for 16.9312 billion won in September of the same year, about three months after receiving the gift.

The timing of Honorary Chairman Cho Yang-rai's real estate gifts follows his children's filing for limited guardianship against him. Previously, his eldest daughter Cho Hee-kyung, Chair of the Hankook Tire Foundation, eldest son Cho Hyun-sik, and second daughter Cho Hee-won filed for limited guardianship with the court in July 2020 after the Honorary Chairman sold all his shares in Hankook & Company to his second son, Chairman Cho Hyun-bum, in June 2020, claiming that "it is necessary to determine whether the father's decision was made voluntarily with a sound state of mind." However, this petition was ultimately dismissed by the Supreme Court in the final re-appeal last month, following the first trial in April 2022 and the appellate court ruling in April this year.

Gifts that skip a generation are subject to heavy taxes. According to the Inheritance and Gift Tax Act, if grandparents gift assets to grandchildren while their parents are still alive, a 30% surcharge is added to the calculated gift tax. If the grandchild is a minor under 19 years of age and the value of the gifted property exceeds 2 billion won, this surcharge increases to 40%. Currently, the gift tax rate for property with a tax base exceeding 1 billion won but not more than 3 billion won is 40% (progressive deduction of 160 million won), and the rate for property exceeding 3 billion won is 50% (progressive deduction of 460 million won).

The current largest shareholder of Hankook & Company is Chairman Cho Hyun-bum, the second son of Honorary Chairman Cho Yang-rai. The Honorary Chairman, founder of the Hankook & Company group, sold all his shares in Hankook & Company to Chairman Cho Hyun-bum through an off-hours block trade in June 2020. Chairman Cho rose to become the largest shareholder of Hankook & Company (42.03%), surpassing his older brother, former advisor Cho Hyun-sik (18.93% stake as of March this year), and his two sisters, Cho Hee-won (10.61%) and Cho Hee-kyung, Chair of the Hankook Tire Foundation (0.81%). Their management dispute began after Honorary Chairman Cho Yang-rai's succession of shares.