House transfer
July 31, 2010 | 30,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
I have a mixed-use building in Bochum, including commercial properties. I managed one of the businesses myself until 2001 (a kiosk). After my husband fell ill, I leased out the kiosk. My tax advisor prepared the balance sheet for this kiosk until 2007. I always wanted to change this, as I only leased out the premises. There is a pure lease contract for the premises. As of March 31, 2008, I have transferred the house to my children. How can I change or solve the issue of accounting for the kiosk? Can I submit a regular tax return? The one for 2008 still needs to be prepared.
Dear client,
Thank you for your inquiry, which I would like to answer based on the information provided and in the context of your efforts in an initial consultation as follows:
By operating the kiosk, you have generated income from business operations within the meaning of § 15 of the Income Tax Act. With the cessation of the business operations by you, a business closure occurs from a tax perspective, which leads to the taxation of the so-called closure profit, which can result in an income tax burden due to the hidden reserves contained in the business assets.
To avoid this, your tax advisor correctly chose not to declare a business closure, but rather to lease the entire business operation. This means that NO closure profit is subject to taxation. Leasing a business operation constitutes a dormant business. The rental income is exempt from trade tax, but the rental income is still considered income from business operations. However, a balance sheet must continue to be prepared.
By leasing the business operation, the business closure is postponed, but can be declared at any time. This is advantageous if you have reached the age of 55 in the meantime and can therefore reduce a tax-free allowance from the business closure profit.
So, if you have reached the age of 55 when transferring to your children, you may be able to declare the business closure using the allowance. However, this ultimately needs to be decided by your tax advisor in cooperation with you, as it needs to be calculated how high the actual closure profit is.
Ultimately, the children do not need to declare the business closure.
Best regards,
Ulrich Stiller
Tax advisor / Graduate in Business Administration
