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 strain, the financial consequences must always be considered in the divorce of a marriage. In this process, the division of assets plays an important role, explains the business law firm MTR Legal Rechtsanwälte, which also advises its clients in family law. However, there are some pitfalls to consider in the division of assets, as the ruling of the Federal Fiscal Court on February 14, 2023, shows.
In the case, the plaintiff had purchased a single-family house together with his then-wife in 2008 and lived there with their joint child. The marriage failed and was eventually divorced. While the man had already moved out, the house continued to be occupied by the wife and the child.
In the divorce proceedings, the division of assets between the separated spouses led to a dispute over the use of the property. Thus, the man finally decided to sell his half co-ownership share of the property to the woman in 2017. The tax office subjected the profit from the sale to taxation.
The man unsuccessfully contested this. The Federal Fiscal Court dismissed the complaint and thus confirmed the first-instance judgment. The sale of the co-ownership share is subject to taxation as a private sales transaction, the Federal Fiscal Court clarified.
A taxable private sales transaction exists if a property is bought and resold within a ten-year period. This also applies to half a co-ownership share that was sold to the spouse as part of the division of assets in the course of the divorce, according to the Federal Fiscal Court.
Taxation is waived if the property was used continuously for personal residential purposes between the purchase and sale or in the year of sale and the two preceding years. This was not the case here, as the man moved out and no longer used the property for his own residential purposes, according to the Federal Fiscal Court. The fact that the former wife and the joint child continued to live there does not change the taxation.
Lawyers experienced in family law advise on all questions related to divorce at MTR Legal.
