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

Sale of a property from an inheritance community

December 12, 2013 | 25,00 EUR | answered by Anton Pernitschka

Hello everyone,

20 years ago, a grandfather inherited 2 two-family houses (as co-heirs) to his grandchildren - the houses were then burdened with mortgages. These houses were built in 1965 and 1968 respectively and have been exclusively owned by the family since then. Each house was used by one party and the other unit was rented out - the income was properly taxed through income tax.

Today, the houses are debt-free, so they are now to be separated. There are different ways in which this could possibly be done:

1.) One possibility would be for one to sell half to the other and invest the money back into the house, which would still belong to both.
2.) Another possibility would be for one to sell half to the other. The proceeds from the sale would be invested in a new, different property.
3.) The houses would be divided so that each person owns one house individually, meaning each person takes over half of the other.

In all cases, it would need to be clarified to what extent taxes would be incurred. After researching on the internet, there were different statements, which I will summarize as follows:
- The houses are privately owned and are not part of business assets.
- The ownership was acquired free of charge through inheritance, with the ownership periods also being inherited.
- The inheritance was subject to inheritance tax and was paid.
- According to §23EStG, the profit (how would the profit be determined in the case of ownership transfer by inheritance??) only has to be subject to income tax if less than 10 years have passed between acquisition (in this case the construction in 1965) and the sale.
- Property transfer tax is 5% of the purchase price.

In conclusion:
Apart from property transfer tax, no further taxes are incurred, as it is a private disposal transaction that falls outside the 10-year period. Additionally, there are notary/court costs for the transfer. In the future, only the newly acquired half would be subject to income tax if the house is resold within 10 years of acquiring the half.

Which amount would actually be subject to tax?
The proceeds?
The profit?

Anton Pernitschka

Dear inquirer,

In the context of an initial consultation and your fee commitment, while adhering to the regulations of this forum, I would like to answer your question.

Taxable under § 23 EStG is the profit from private sales transactions.

Profit or loss from sales transactions is, according to § 23 para. 1 EStG, the difference between the selling price and the acquisition or production costs, and advertising costs on the other hand.

In the case of gratuitous acquisition, according to § 23 para. 1 sentence 4 EStG, the acquisition of the asset by the legal successor is to be attributed to the predecessor for the purposes of this provision.

In your case, the acquisition costs from 1965 or 1968 would be relevant. A taxable sales transaction would then fail at the 10-year limit.

In the event of a planned (partial) sale, a new deadline in the sense of § 23 EStG begins to run.

Kind regards,

Anton Pernitschka
Tax consultant