Groundbreaking ruling of the Federal Fiscal Court, Ref.: IX R 13/22
If an heir of an estate community buys out their shares and subsequently sells a property from the estate, no income tax is incurred. The Federal Fiscal Court decided this in a ruling dated September 26, 2023 (Ref.: IX R 13/22).
If a property is bought and resold within the speculation period of ten years, income tax is incurred on the profit. The Federal Fiscal Court has now determined in a groundbreaking decision that the tax does not apply if an heir takes over the shares of the remaining community and resells a property belonging to the estate. Then, there is no classic private sales transaction, formerly a speculation transaction, explains the law firm MTR Legal Rechtsanwälte, which advises, among others, in tax law.
Plaintiff takes over shares of the estate community
In the underlying case, the plaintiff inherited 52 percent of his deceased wife’s estate. The rest was inherited by the two children of the decedent. The estate also included a plot of land. The man bought the children’s share of the inheritance and thus became the sole owner of the property, which he subsequently sold. Since less than ten years had passed between the acquisition and the sale of the property, the competent tax office saw the sale as a private sales transaction and taxed the profit accordingly.
BFH: No classic private sales transaction
The plaintiff successfully contested the tax assessment notice. The BFH allowed the complaint. It argued that the acquisition of shares in an estate community was not equivalent to the purchase of a property from the estate. A prerequisite for taxation is that the sold property was also previously acquired. This is not the case with the takeover of shares in an estate community. There is no classic private sales transaction within the meaning of § 23 EStG when the shares of other heirs are acquired and later a property belonging to the estate is sold, the BFH clarified.
With this ruling, the Federal Fiscal Court has deviated from its previous case law. For real estate in the estate, estate communities should consider how they want to handle it to optimize the taxation process.
MTR Legal Rechtsanwälte advises in tax law and in tax disputes with the tax authorities.
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