Tax advisor’s duty to inform regarding one-time lifetime tax benefits
The responsibilities of tax advisors include providing comprehensive information to their clients, especially concerning tax benefits that can be claimed only once in a lifetime. This was clarified by the Lübeck Regional Court in its judgment of June 5, 2024 (Case No.: 15 O 7/23).
Facts and initial situation
In the underlying case, the client sought damages from his tax advisor after claiming the tax exemption for the sale of an owner-occupied home under Section 17 (1) Sentence 3 EStG (so-called family home privilege) during a property sale. It later emerged that the client had previously and mistakenly already made use of this benefit, thereby exhausting it. The client was unaware that this privilege could only be claimed once and of the implications, arguing that his tax advisor should have specifically pointed out the risk of this benefit possibly being already consumed.
Decision of the Regional Court
The Lübeck Regional Court emphasized that tax advisors must fulfill their examination and notification obligations if tax benefits—such as the family home privilege—can, by law, only be claimed once in a lifetime. The court chamber highlighted that the tax advisor is subject to a proactive duty to inform. This duty applies in particular where the facts provide clear indications that the privilege may have already been used.
Scope of the duty to inform
The court’s decision stresses that tax advisors cannot rely on general knowledge or assumptions of their clients, but must explicitly and individually inform about the limited possibility of re-claiming the benefit. Appropriate documentation and information obligations are also essential for comprehensive risk disclosure, in order to prevent potential economic disadvantages.
Implications for tax consulting
The decision of the Lübeck Regional Court demonstrates that advisors in tax law must exercise increased diligence when handling economically relevant matters, especially when tax benefits can legally only be claimed once. For clients, the ruling confirms the protective role of tax advice regarding possible misinformation and its financial consequences.
The court decision is not yet final. There is a possibility of appeal, and further review in higher courts may follow. (Source: LG Lübeck, 15 O 7/23)
Discreet support for complex tax matters
The selection, utilization, and structuring of tax benefits is often associated with far-reaching consequences. Companies, investors, and high-net-worth individuals regularly face challenging tax issues. For individual questions about tax benefits or other aspects of tax law, MTR Legal offers well-founded legal advice in tax law.
