Historically, South Korea has mandated the separation of operating and non-operating income/expenses in the statement of comprehensive income, despite such classification not being required by International Accounting Standard (IAS) 1. However, under IAS 1, the definition of the “operating” concept remained ambiguous, causing confusion among tax authorities, reporting entities, and courts over how to classify trademark royalty income. This study analyzes a tax dispute case where the classification of trademark royalty income (operating vs. non-operating) determines the applicability of deemed gift taxation due to such accounting ambiguity, resulting in conflicting interpretations between tax authorities and the judiciary. By comparing decisions that prioritized economic substance with those that prioritized legal form, this research examines how accounting ambiguity affects taxation and provides critical policy implications for accounting and tax policy makers. On the other hand, IFRS 18 “Presentation and Disclosure of Financial Statements”, published by the International Accounting Standards Board (IASB) and set for implementation in 2027, requires operating performance to be measured based on a residual income concept. This standard is significant as it makes the boundary of operating income clearer, which in turn reduces the risk of conflicting judgments among tax authorities, companies, and courts over income classification, as demonstrated in this study. This research contributes to the literature by expanding the discourse on trademark issues - previously centered on economic, legal, and valuation perspectives - into the domain of accounting and taxation.