If the joint house is sold to the former spouse after the divorce, taxes may be incurred according to a ruling by the Federal Fiscal Court on 14.02.2023 (Ref. IX R 11/21).
Despite all the emotional stress, the financial consequences of a divorce must always be considered. Asset division plays an important role in this matter, explains the corporate law firm MTR Legal Rechtsanwälte, which also advises its clients on family law. However, there are some pitfalls to be aware of in asset division, as the ruling by the Federal Fiscal Court on 14 February 2023 shows.
In this case, the plaintiff had purchased a single-family house together with his then-wife in 2008 and lived there with the joint child. The marriage failed and was eventually divorced. While the man had already moved out, the house continued to be occupied by the woman and the child.
During the divorce proceedings, there was a dispute over the use of the property when the separated spouses divided the assets. As a result, the man finally decided to sell his half ownership share of the property to the woman in 2017. The tax office subjected the profit from the sale to taxation.
The man fought against this in vain. The Federal Fiscal Court dismissed the appeal, thus affirming the first-instance judgment. The sale of the ownership share is subject to taxation as a private disposal transaction, the BFH clarified.
A taxable private disposal transaction exists when a property is bought and sold again within a ten-year period. This also applies to a half ownership share sold to the spouse during asset division as part of the divorce, according to the BFH.
The taxation is waived only if the property was used continuously for personal residential purposes between purchase and sale, or in the year of disposition and the two preceding years. This was not the case here since the man had moved out and no longer used the property for his own residential purposes, BFH stated. The fact that the former wife still lived there with the joint child does not change the taxation.
Experienced lawyers in family law at MTR Legal provide advice on all matters regarding divorce.
