Asserting the value of the property and land against the tax office.
September 20, 2014 | 40,00 EUR | answered by Anton Pernitschka
I bought a 1960s 2-family house in need of renovation for about 200,000 €. The house is situated on a 750 m² plot of land in a residential area with a land value of 230 €/m² (according to the Upper Valuation Committee of the state of North Rhine-Westphalia).
Therefore, the plot of land alone would already have a value of approximately 170,000 €. This would leave a value of only 30,000 € for the house, with all the disadvantages regarding deductibility of renovation costs and the amount of depreciation.
In reality, the plot of land is very narrow and long, and can only be accessed from the street side. Therefore, a so-called backyard development is technically hardly possible and is currently prohibited by the municipality.
The value of the plot of land is actually much lower and tends more towards agricultural land.
How can this be convincingly proven to the tax office?
In the case of condominiums in 6-family houses, I have always been able to enforce the 80/20 rule with the tax office so far (80% of the purchase price is allocated to the apartment, and 20% to the assigned land area).
What strategy would you recommend in the above case?
Dear inquirer,
As part of an initial consultation and considering your fee, in accordance with the regulations of this forum, I would like to answer your question.
According to the Federal Fiscal Court's judgment of 10.10.2000, BStBl II 2001, 183, the total purchase price for a developed property should be allocated not according to the so-called residual value method, but according to the ratio of the market values or partial values of the land on one hand and the building on the other.
The purchase price allocation is based on the regulations of the determination of market values based on the Building Code (asset value method according to property valuation). This is a qualified estimate that is expertly justified and rebuttable.
The Federal Ministry of Finance published a calculation guide for the allocation of a property purchase price in January 2014 with form KPA 2/14. This guide explains the calculation scheme of the allocation using an example.
In your case, the tax office can generally follow this guide or instruction from the federal ministry. Of course, this allocation method can be deviated from. Based on the circumstances, the layout of the property deviates from the standard case, so the value of the property would actually be much lower. This argument should also be accepted by the tax office. On the other hand, the building is in need of renovation. The amount of these expenses (unknown) could possibly be used as an argument against the value of the building.
Ultimately, the tax office will likely only be persuaded by an expert opinion. It should be noted that tax offices can also verify estimates by their own appraisers.
The response was provided based on your description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Sincerely,
Anton Pernitschka
Tax advisor
