Concept and Legal Classification of Mixed Gift
Die Mixed Gift is a term from German civil law that describes a contract arrangement in which a gift is combined with a counter-performance. The defining feature of the mixed gift is that the transfer relationship contains both gratuitous and non-gratuitous elements. The most common scenario occurs in contracts where the consideration does not cover the full value of the transferred assets, leaving a gratuitous component.
Distinguishing the Mixed Gift from Sale, Gift, and Exchange
Pure Gift
A gift pursuant to Section 516 BGB is a contract under which one person grants another a gratuitous benefit from their own assets and both parties agree on the gratuity. There is no counter-performance.
Sales Contract
The sales contract according to Section 433 BGB consists of the exchange of goods for a market-typical consideration. A mixed gift differs from a sale in that the purchaser’s counter-performance does not fully cover the value of the item transferred, so part of the legal transaction is a gratuitous transfer.
Exchange
Section 480 BGB defines an exchange as a contract for the mutual transfer of things or rights. A mixed gift is present if the values of the exchanged items or performances significantly diverge, thus acquiring a gratuitous character.
Requirements for a Mixed Gift
A mixed gift requires that, within a single legal transaction, the value of the grantor’s offer and the consideration of the recipient differ. The gratuitous character may be expressly stated or result from commercial practice and the parties’ intent. A classic example is the transfer of a property at a purchase price clearly below its market value.
Legal Consequences of the Mixed Gift
Application of Gift Law Provisions
For the gratuitous part of the transfer, the provisions on gifts apply. This primarily concerns formal requirements (especially Section 518 BGB; notarial certification in the case of real estate gifts), rights of revocation (Sections 530 et seq. BGB) as well as questions of challenge.
Tax Consequences
For real estate transfer tax, income tax, and gift tax purposes, the mixed gift is of considerable importance. In the area of gift tax (Section 7 ErbStG), the gratuitous portion of the transaction is subject to taxation. The tax assessment base is determined by the market value of the transferred assets minus the actual consideration paid.
Rights of Reclamation
If the mixed gift can be reclaimed (e.g., due to gross ingratitude, Sections 530, 531 BGB), this right of reclamation only covers the gratuitous part of the transfer.
Challenge
If a mixed gift is concluded under deception, threat, or mistake, it can – like other transactions – be contested according to general provisions (Sections 119 et seq. BGB, Sections 123 et seq. BGB). Here too, the contestation generally applies to the entire transaction; however, if the contract is divisible, a distinction is often made as to which part the contestation applies.
Typical Applications of the Mixed Gift
In legal transactions, mixed gifts occur particularly in the following contexts:
- Transfers of real estate to relatives below market value
- Disposals of parts of businesses on preferential terms
- Transfer of company shares with (partial) waiver of appropriate remuneration
- Transfers between spouses within the scope of anticipated succession
Valuation and Consequences in Case of Divisibility
The treatment of the mixed gift frequently depends on whether the legal transaction is divisible (splitting into a non-gratuitous and a gratuitous part, so-called separation theory) or if an overall view is taken (unitary theory). The highest courts and legal literature tend towards the separation theory when it comes to reciprocal contracts, particularly relating to tax matters and claims for restitution.
Requirements of Form and Formalities
For the gratuitous part, the form requirements for gifts (Section 518 BGB) may be relevant. For real estate, notarization according to Section 311b BGB is mandatory. If this form is lacking, the legal transaction is void to the extent that its essential part is to be a gift.
Tax Law Aspects of the Mixed Gift
Income Tax
If hidden reserves are transferred as part of a mixed gift, the consequences for income tax must be considered. The non-gratuitous part may result in taxable disposal (Section 22 EStG, Section 23 EStG), while the gratuitous part remains tax-free.
Gift Tax
For gift tax, the gratuitous part of the assessment base is decisive. Allowances and tax rates depend on the relationship between donor and recipient pursuant to Section 16 ErbStG.
Real Estate Transfer Tax
When acquiring real estate, the non-gratuitous part is generally subject to real estate transfer tax, whereas the gratuitous part may be subject to gift tax.
Significance of the Mixed Gift in Inheritance Law
Mixed gifts become relevant in inheritance disputes, particularly in connection with claims for compulsory portion supplements under Sections 2325 et seq. BGB. The transfer is considered a gift within the meaning of these provisions, unless it is primarily a pure counter-performance for an obligation.
Summary
The mixed gift represents a frequent and varied structuring tool in German civil law, which raises contractual, real, inheritance, and tax law issues. Of central importance is the distinction between the non-gratuitous and gratuitous parts as well as the correct legal classification and treatment of both elements in practice and case law.
Frequently Asked Questions
How is a mixed gift legally distinguished from a sales contract or a pure gift?
Legally, a mixed gift exists when a financial advantage is granted partially gratuitously and partially for consideration – for example, if the value of the transfer significantly exceeds the value of the counter-performance. This scenario is to be distinguished in particular from a pure sales contract, where performance and counter-performance are equivalent, and from a pure gift, where no consideration is provided at all. The key factor in distinguishing is whether the benefit granted differs significantly from the consideration and what intentions the parties had. Case law usually assumes a mixed gift if the donor wants to provide the donee with a financial advantage and the agreed purchase price is below the market value of the transferred item. The determining factor is always the economic value at the time of transfer and not any later market value. If gift and sales contract elements coexist, the gift portion is legally treated as a gift, while the non-gratuitous part is treated as a sales contract; the respective legal regulations apply to both parts. Clear documentation of the reasons and value relationships is essential for the legal classification and any tax consequences.
What formal requirements apply to a mixed gift, for example in real estate?
Mixed gifts are subject to the formal requirements of both types of legal transactions they combine. In particular, for real estate both the gratuitous transfer and the paid part require notarial certification in accordance with Section 311b(1) BGB. If notarial form is lacking, the transaction is entirely invalid. The prescribed form both protects the parties and ensures legal clarity, especially in relation to third parties (such as the land register). For movable property, agreement and delivery are generally sufficient as long as there are no specific form requirements. If the mixed gift is partially a gift subject to conditions, this too must be notarized if real estate or other form-dependent transactions are involved. It is therefore always important to ensure that the required form is observed for both the paid and gratuitous parts in order to ensure the validity of the mixed gift.
What are the tax consequences of a mixed gift?
For tax purposes, a mixed gift requires a division of the asset transfer into a non-gratuitous and a gratuitous part. The non-gratuitous part is usually subject to real estate transfer tax (for real estate) or other relevant taxes such as VAT, if the transaction is not tax-exempt. The gratuitous part, on the other hand, is subject to gift tax (Section 7 ErbStG). The decisive factor is the difference between the market value of the asset transferred and the actual consideration paid. The tax authorities examine closely whether the valuation is plausible and whether there is any abusive arrangement. If close relatives (such as children or spouses) benefit, the personal allowances under the ErbStG must be observed. The division must be documented and indicated correctly for tax purposes in order to avoid subsequent taxation or sanctions.
How does a mixed gift affect claims for compulsory portions and supplementary compulsory portions under inheritance law?
In inheritance law, mixed gifts are taken into account for the supplementary compulsory portion if the transfer includes gratuitous components. According to Section 2325 BGB, mixed gifts are included in the supplementary compulsory portion to the extent that they have the character of a gift. The relevant value is that of the gratuitous share; this increases, in the event of the donor’s death, the basis for calculating the compulsory share claims of close relatives. The non-gratuitous part is excluded from this. The decisive factor is the date on which the gift was made, since consideration under the so-called melting rule is reduced within ten years of the transfer. The distinction and precise valuation is often contentious, especially with real estate, and should be carefully documented to avoid later inheritance disputes.
What special duties of care and information exist in mixed gifts toward the recipient?
The donor is generally subject to the usual duties of care of a contracting party. If the beneficiary is, for example, a minor or obviously inexperienced, there may be an increased duty to inform. In the case of a mixed gift, the donor should inform the recipient if the transfer involves significant legal or tax risks. In addition, fiduciary or loyalty duties may become relevant, especially in a family context. For real estate transfers, the donor is obliged to disclose any encumbrances, contaminated sites, or restrictions. If the mixed gift is made with conditions or counter-performances, these must be clearly and comprehensively specified in the contract to avoid later misunderstandings. Finally, the recipient should be informed of any notification requirements to the tax office and their deadlines, as failures may have tax disadvantages.
How can claims from a mixed gift be enforced in case of reversal or revocation?
In the event of a reversal – for example, revocation due to gross ingratitude pursuant to Section 530 BGB – the transfer of assets must be undone. The part received as a gift can be reclaimed, while any consideration paid is set off. If the mixed gift is part of a single legal transaction, it must be examined whether it is divisible. If it is not, the whole contract may be invalid, which affects the reversal. For the portion acquired for consideration, the rules of sales law and any warranty rights apply. If part of the purchase price owed has already been paid, it will be set off against the donor’s restitution claim. In the event of a dispute, precise documentation of services received, conditions, and payments is essential to enforce claims in court.
What liability risks exist for the donor and recipient in a mixed gift?
For a mixed gift, the parties face different liability risks. The donor is only liable for the gratuitous part to a limited extent: Under Section 521 BGB, they are liable for defects only in cases of intent and gross negligence. For the paid part, sales law applies, including more stringent warranty obligations. For the gratuitous part, liability can be further limited by agreement. The recipient bears the risk of being obliged to return the asset if contractual obligations or conditions (e.g., maintenance obligations) are breached. There are also potential tax liability risks, especially for incomplete or late disclosures under gift tax law. Both parties should ensure the contract is clearly drafted and all legal duties are complied with to avoid liability cases.
