Tax implications of rental income versus life annuity to be paid
October 8, 2021 | 60,00 EUR | answered by Steuerberater Knut Christiansen
My mother wants to give me her leased farmland as a gift, among other things. In return, she wants to receive a life annuity equal to the lease payment. How does this affect income tax?
Do I understand it correctly:
1. Instead of my mother declaring rental and leasing income, it will be declared by me. I can then deduct these as special expenses in full and there would be no tax effect, correct?
2. The life annuity will be declared as other income for my mother, correct? What is the yield portion for the taxable amount?
Thank you.
Good evening and thank you for using frag-einen.com!
I would like to provide you with the following information regarding your questions.
The deduction as special expenses for annuities (provision payments) has only been possible in certain cases since 2008. This applies in particular to the transfer of businesses, parts of businesses, or at least 50% GmbH shares. The mere transfer of real estate or land no longer falls under the special expenses deduction for transfers since 2008.
Therefore, in your case, I would recommend a transfer with reservation of usufruct. In this case, your mother can continue to collect the rent and must also pay taxes on it. On the other hand, you will only receive ownership transfer and do not have to pay taxes on any other income.
However, your mother still has to continue to pay taxes on the rent as usual. Taxation under the earnings portion is no longer provided for since the restructuring in 2008 (for provision payments). Therefore, the taxation of income will continue to be the same for your mother as before.
I hope this answers your question. Feel free to contact me if anything remains unclear.
Please note that this forum cannot replace personal advice. It is intended for initial tax assessment purposes.
Best regards,
Knut Christiansen
Tax consultant
