Ask a tax advisor on the topic of Real estate taxation

3 object boundary interpretation

December 29, 2019 | 50,00 EUR | answered by Steuerberater Knut Christiansen

Good day,

I have a special question regarding the three-property limit. The situation is as follows:

1. In 2019, I sold a garage for 14,000 euros, which I had bought for 13,400 euros in 2014. The reason for the sale was that the trouble with the property management had become too high, and I am aware that the profit must be taxed as the property was not held for ten years.
2. I own half of an apartment, 50 percent. I have owned the property for 10 years now. Since I am now separated from my partner, I would like to sell him my share.
3. In 2020, an apartment that I have owned and rented out for 13 years is to be sold. Unfortunately, I had to renovate the apartment after vandalism by the tenant, including the bathroom and kitchen. Does a partial renovation count as a refurbishment?
4. In October 2021, I plan to sell another apartment that would also have been in my possession for 10 years.
5. In August 2023, another apartment that I have owned for 10 years should be sold.

And now to my question:

I work full-time in the social sector and rent my home. After my separation, I am now looking for a 60 sqm apartment to buy in Munich. In order to buy this, I need to sell some properties as I do not have the capital.

I have read up on the three-property limit and know that it is discussed differently. Some say that if the property has been held for 10 years and you are not active in the real estate industry, it does not matter how many properties you sell.

Others say that this is contentious. Well... the garage was sold due to too much trouble with the management. Selling my share after a separation is probably discussed differently in literature - some see it as an exception, etc.

If the sale of the property due to separation would be considered an exception, would I still be within the three properties in five years with 1, 3, and 4? Could I then sell 1, 2, 3, and 4 as a private individual? Would it still be possible to sell property 5 in the autumn of 2023?

As I mentioned, these are apartments that I am selling in order to buy my own home. However, I want to avoid being seen as engaging in commercial trading.

I would greatly appreciate any recommendations - especially regarding the property from the separation, as we were not married.

Thank you very much.

Steuerberater Knut Christiansen

Good day,

An important factor in determining whether the 3-object limit has been exceeded is whether each object sold actually qualifies as an object (countable object) within the meaning of this limit.

The guidelines of the Federal Ministry of Finance should provide clarification on this matter. For example, it is stipulated that objects that have been rented out long-term (at least 10 years) do not qualify as countable objects. The same applies to objects that have been used for own residential purposes for at least 5 years. Since, except for object 1 (garage), all other objects meet these criteria and you are not knowledgeable about the industry (real estate agent, property developer, etc.), I see no commercial real estate trade in your case due to the sales. You can find the BMF letter at the following link. The diagram at the end of the letter is quite helpful:

https://datenbank.nwb.de/Dokument/Anzeigen/129733/

Nevertheless, I would recommend obtaining a binding ruling from the tax office so that they can provide you with a legally binding answer (https://www.finanztip.de/verbindliche-auskunft-finanzamt/).

I hope this information is helpful, but feel free to reach out again if you have any further questions.

Best regards and have a lovely Sunday!

Knut Christiansen
Tax advisor