A family home can be inherited tax-free even if the heir can only move in later due to renovation work. This was decided by the Federal Fiscal Court (Ref. II R 6/21).
When a family home is inherited, under certain conditions, no inheritance tax is due. For this, the heir must move into the family home immediately, usually within six months, and use it themselves for at least ten years for residential purposes, explains the law firm MTR Legal Rechtsanwälte, which has a focus on tax law in its advisory services.
In exceptional cases, exemption from inheritance tax is also possible if the heir does not move in immediately. One reason can be, for example, if extensive clearance and renovation work needs to be carried out in the house first, as the BFH ruling shows.
In this case, the heiress moved into the family home about 18 months after the inheritance. An earlier move was not possible for her because the necessary renovation work was delayed due to a shortage of craftsmen. However, this argument did not convince the responsible tax office. It imposed inheritance tax because the heiress did not move into the family home immediately.
The heiress successfully contested this. Ultimately, the BFH decided that an exception was possible in this case. Craftsmen must indeed be commissioned in a timely manner so that the necessary renovation work can be carried out as quickly as possible. However, if the craftsmen cannot complete the work any faster, the heir cannot be blamed, said the BFH. However, heirs must prove that they arranged for the commissioning of craftsmen in a timely manner.
Heirs are therefore required to make arrangements for hiring craftsmen early and, if necessary, consider alternatives. Whether an exemption from inheritance tax is exceptionally possible if the family home is not moved into immediately must always be decided on a case-by-case basis.
Likewise, in exceptional cases, the exemption from inheritance tax inheritance tax may also be possible if the heir can no longer occupy the family home for health reasons before the ten-year period expires.
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