Ask a tax advisor on the topic of Inheritance tax

Triggering of real estate transfer tax and/or capital gains tax by transferring a property?

November 13, 2011 | 30,00 EUR | answered by Oliver Burchardt

Dear Sir or Madam,

In the will, the sole heir must hand over "one quarter of the estate" to the two children of the deceased verbatim. The estate consists of securities, savings deposits, and real estate. The will does not specify how the legacy should be fulfilled. Although the legacy corresponds in value to the compulsory portion (25%), there is no mention that the two children are "disinherited".

The sole heir and one child have agreed to partially fulfill the legacy by transferring a property whose value does not exceed 25%. The property had been owned by the deceased for more than 20 years, and its value was determined by a state-certified, sworn appraiser.

I have the following questions:
1) Will real estate transfer tax be due upon the transfer of the property? Or can the notarial contract be structured in such a way that no real estate transfer tax is due?

2) Could a taxable (private) capital gain arise for the sole heir upon the transfer of the property within the framework of the legacy?

I kindly request a response by Monday, November 14, 2011, at the latest.

Thank you.

Oliver Burchardt

Dear inquirer,

Thank you for your inquiry, which I am happy to answer as part of an initial consultation.

Please note that the tax assessment is based on the information provided. Changing, adding or omitting information can potentially alter the result, possibly significantly.

Due to the provision that the children receive a bequest, there is an acquisition mortis causa, which triggers inheritance tax for the legatee (the children) according to § 3 para. 1 No. 1 ErbStG.

The fulfillment by the sole heir is not a tax-relevant transaction, but only affects the distribution of the inheritance. Furthermore, due to the holding period of the property by the deceased, which is attributed to the heir according to § 23 para. 1 sentence 3 EStG, there would be no private capital gains tax event even in the case of a sale.

For real estate transfer tax purposes, there is an exemption according to § 3 No. 2 GrEStG.

I hope that my explanations have been helpful to you.

Kind regards,

Oliver Burchardt
Certified Public Accountant
Tax Consultant