Speculation tax on the sale of inherited real estate sale
January 26, 2010 | 90,00 EUR | answered by Michael Herrmann
Hello
My name is Andreas and last year I sold a house and I am unsure whether I have to pay income tax on the profit in full or in part - the keyword is speculation tax.
The situation is as follows:
1950s: House built by my grandmother. My grandmother, my parents, and I lived in the house.
October 22, 1999: My grandmother dies. My father is the heir (unfree advance heir) and I am the remainderman. I also receive the right to use the ground floor now. Since I have moved out (since 1996), I rent out this apartment after a short renovation period. My father continues to live in the house (1st floor), where, according to the grandmother's will, he has a lifelong right of residence with his second wife.
May 12, 2009: Since my father is not in the best health, he prefers to look for a small apartment instead of dealing with the house (garden, snow clearing, etc). So we make an assignment agreement, which provides for the transfer of the house to me (so to speak, premature inheritance) and I pay my father and his wife a one-time amount of 120,000 euros for the lifelong right of residence. The contract stipulates that my father and his wife move out by August 1, 2009.
The transfer of ownership to me (land register entry) was on May 15, 2009 (immediate transfer of ownership without pre-registration of conveyance).
May 15, 2009 - September 21, 2009: I am registered in the house with a second residence.
May 31, 2009: The lease for the ground floor ends, the tenant moves out on April 30.
June 17, 2009: I sell the house for 460,000 euros, possession transfer is on August 1, 2009, transfer of ownership (land register) was on September 20, 2009.
My questions:
1. To my knowledge, an inherited property can be sold without speculation tax if the property has always been occupied by the owner. Does my registered second residence suffice for this?
2. If not, can the assignment agreement of May 12, 2009 be considered as early inheritance/gift, even though I paid 120,000 euros as compensation for the right of residence, so that no speculation tax is incurred on this basis as well? Or will the assignment be considered as a purchase agreement, leading to a taxable profit?
3. If speculation tax is to be paid, how is it calculated?
a. Difference between selling price - purchase price = 340,000 euros or
b. Since I already paid inheritance tax for the right to use the ground floor in 1999 (the value was set at 130,000 DM by the tax office), is there another way to calculate it? How?
4
Dear inquirer,
First of all, thank you for your inquiry, which I would like to answer based on the information provided and in the context of your request for initial consultation. The response is based on the description of the situation. Missing or incorrect information regarding the actual circumstances can influence the legal outcome.
The issue of the speculation tax mentioned arises when a property or property-like right is sold within 10 years of acquisition. If the house was used for personal residence during the last two years or was exclusively used for personal residence during acquisition and sale, the taxation is waived.
In your case, it must first be determined whether there is actually a paid acquisition. You inherited the property, so there is no paid acquisition. Therefore, a private sales transaction regarding the property is not possible.
The right of residence of your father is acquired for a fee. However, this transaction has no connection to the sale of the property, as a long-term right of residence is not considered a property-like right. (BFH v. 11.08.1967 - VI R 67/66) According to the BFH, a long-term right of residence and ownership of a house are not only legally but also economically so different that it is not justified to consider the acquisition of the long-term right of residence as the acquisition of ownership at the same time. The case may have a different chronological order, but it represents the main point. Ownership of the house and the right of residence are separate rights to be treated separately.
The relinquishment of the right of residence through the sale of the house is again paid, as the sale price of the property also includes an amount for the right of residence. This sales transaction is subject to taxation according to § 23 (1) No. 2 EStG, as there is less than a year between acquisition and sale. The determination of profit can only be done through an estimation of the selling price. Since there is a very short period between acquisition and sale of the right of residence, hardly any profit may have been generated. Profit is the excess of the selling price over the acquisition costs. I recommend you to set the estimated selling price at the level of the acquisition costs, so that no profit is generated. Based on the information provided, I see no reason why the right of residence should have increased in value in such a short time.
Therefore, there is no need to report any speculative transactions, as no profit has been generated. In general, these earnings are to be declared on form SO.
The inheritance tax paid in 1999 is not relevant to the situation.
I hope that these explanations have given you an initial overview of the situation and remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant
