Attention Mr. Christiansen - Further questions about donations
March 28, 2019 | 50,00 EUR | answered by Steuerberater Knut Christiansen
Dear Mr. Christiansen,
Thank you for your advice, I have another question.
Reminder of the key points:
My husband and I own two apartments, each 50% / 50%.
We will sign the gift contract for apartment No. 1 at the beginning of April and a few weeks later (after the land register entry) the gift contract for apartment No. 2. There is no gift tax.
Apartment No. 1: No loan. I am gifting him my 50% share. He lives in the apartment.
Apartment No. 2: With loan. He gifts me his 50% share and his remaining loan share. It is therefore a "consideration transaction". Subject to speculation tax. The apartment has been rented out since 2013. Since our separation, we have been submitting a "declaration for separate and uniform determination". From the gift, once I own the apartment 100%, I will start submitting "Appendix V" again.
My question is:
Which invoices can we deduct? Who of the two of us can deduct them? As what?
(a) Lawyer's invoice for the initial consultation regarding property exchange
(b) Your invoices (tax advice)
(c) Notary invoice for the gift of apartment No. 1
(d) Notary invoice for the gift of apartment No. 2
(e) Prepayment penalty for an extraordinary repayment (with loan takeover)
(f) Land register entry for apartment No. 1
(g) Land register entry for apartment No. 2
Regarding invoices (a) and (b): Can I declare them as operating expenses for the rented apartment (No. 2) in the "declaration for separate and uniform determination"?
Regarding invoice (c): At the time of the gift, apartment No. 1 is my husband's second residence, as he currently works in another city. He may want to rent out the apartment. Can costs for a rental property be declared as operating expenses?
Regarding invoice (d): It says: "If the donor bears the costs, they count as additional gifts". However, the donor (my husband) is conducting a consideration transaction with this gift, as he is also gifting me his debts. He will have to pay a very high speculation tax for this. Are the related notary costs not operating expenses? Or should I cover the costs and deduct them as operating expenses in my "Appendix V" for the rented apartment (No. 2) after the gift?
Regarding invoice (e): Can I deduct it in my "Appendix V"?
Thank you in advance for your efforts.
Best regards
Good day and thank you for your inquiry, which I would like to answer as follows. The answers are noted below each question.
Which invoices are we allowed to deduct? Which one of us two can deduct them? As what?
(a) Lawyer's invoice for the initial consultation for property exchange
Basically, the consultation for the acquisition of the respective apartment leads to the invoice being part of the acquisition costs of the apartment. Since apartment 1 is only used for personal use, this does not have any tax implications. Apartment 2 is rented out, so the invoice basically increases the basis for depreciation. The land portion would need to be deducted proportionally, as it is not depreciated.
(b) Your invoices (tax consulting)
Basically, the same applies as under a). However, I would claim 50% of the costs as ongoing expenses in Annex V ("tax consulting") and see if the tax office accepts this.
(c) Notary invoice for the donation of apartment No. 1
Since the apartment is only used for personal use, these costs cannot be claimed for tax purposes. They are part of the acquisition costs. If the apartment is ever sold, these costs could be deducted from the selling price and reduce any potential taxable capital gains. As for whether expenses can be claimed as advertising costs if the apartment is to be rented out, it is possible. However, it must be proven that there was a specific intention to rent out the property. This is usually done by instructing a real estate agent or advertising consistently (invoices as proof).
(d) Notary invoice for the donation of apartment No. 2
These costs are part of the acquisition costs of the apartment and would need to be depreciated proportionally for the building portion (excluding land) (depreciation as part of V+V). You could also shift the costs to your husband. Then he would have selling costs proportionally on the capital gain, which would reduce the income.
(e) Prepayment penalty for an extraordinary repayment (in connection with loan assumption)
If the loan is related to income, a prepayment penalty can also be deducted as advertising costs.
(f) Land registry entry for apartment No. 1
Land registry costs (ownership registration) are acquisition costs for the apartments.
(g) Land registry entry for apartment No. 1
See f)
I hope this answers your questions. Please feel free to ask further questions at no charge.
Best regards,
Knut Christiansen
Tax consultant
