Ask a tax advisor on the topic of Other questions to tax advisors

Acquisition of a residential property from family ownership.

May 24, 2014 | 40,00 EUR | answered by Dipl.-Kfm. Frank-Olaf Illiges

Dear Sir or Madam,

I am writing to inquire about the acquisition of a residential property from family ownership.

In 2010, I purchased a house for private residential purposes from my mother. All agreements between my mother and myself were made verbally. To this day, no entry has been made in the land register in my name. This means that the property is still (for over 10 years) in my mother's possession. However, from 2010 to 2014, I paid a total of 45,500.00 € to my mother for this property. These payments were not reported to the tax office. I had planned to have the property officially transferred to my ownership by a notary in the near future. However, for personal reasons, I have now decided to cancel the acquisition of the property and have my mother repay me the amount of 45,500.00 €. This repayment is not a problem for my mother. She will now sell the house to another interested party.

A monthly repayment rate of 1,000.00 € has been agreed upon.

My questions to you are:

Does the previous acquisition or repurchase pose any problems?

What should I consider in ensuring a proper handling of my request? Is there anything else I could do differently?

Do I need to report the repayment of 45,500.00 € or the monthly installments of 1,000.00 € in my income tax return?

These monthly payments of 1,000.00 € will be my only income for a certain period of time. What should I report in my income tax return during this period, or how should I proceed?

I kindly request guidance on this matter.

Thank you!

Yours sincerely

Dipl.-Kfm. Frank-Olaf Illiges

Dear questioner,

Thank you for your inquiry, which I am happy to answer, taking into consideration your input and the rules of this platform.

Please note that my explanation is based on the facts presented, and that adding, omitting, changing information, or the ambiguity of the information can change the tax result. Please be aware that this does not replace individual comprehensive advice.

Since the sale of the property was neither notarized nor registered in the land register, the purchase contract between you and your mother is invalid from the beginning (§ 313 Civil Code (BGB)). Therefore, the sale of the property did not take place at all. The purchase price of EUR 45,500.00 that you paid must be refunded to you by your mother. If the refund is made in installments of EUR 1,000.00, you are essentially granting your mother a loan that is repaid in installments. The repayment amounts of the loan are not income for tax purposes and therefore do not need to be reported in your income tax return.

However, if you agree with your mother to charge interest on the loan, the annual interest under § 20 para. 1 no. 7 Income Tax Act (EStG) is taxable income from capital assets and must be reported in your income tax return.

Kind regards,
Dipl.-Kfm. Frank-Olaf Illiges
Tax advisor
Am Wieksbach 55
33378 Rheda-Wiedenbrück

Phone: 05242/4055666
Fax: 05242/4055677
Website: www.illiges-steuerberatung.de
Email: office@illiges-steuerberatung.de