Exiting a loan contract / transferring ownership of a residential area
Mrs. B and I bought a farm in November 2000. She paid half (150,000 DM) directly. A loan agreement was taken out for the other half (10 years, 2% repayment, 168,000 DM, installment 1200 DM/month). We are both responsible for this loan agreement at 50%. In the land register, I am listed as a 25% owner, she as a 75% owner. At the end of 2003, we separated amicably. She took over the installment payments, I moved out and paid her compensation for the expenses of my dogs and the horse that remained on the farm.
Now she (alone) has obtained a new follow-up loan agreement. For this, my quarter must be transferred to her. How can we minimize the taxes that arise in the process (gift tax, income tax).
I have learned (from the tax office) that the fact that Mrs. B has been paying off our loan alone for years leads to gift tax claims. If I now transfer my share of the farm to her below its value (for the amount I have paid off, about 4000 euros in net loan repayment), will this offset it or do we both have to pay gift tax?
I would be grateful for a quick response. We have worn out a notary and a tax advisor and there are always new twists and turns. Therefore, I am trying to get a third opinion here.
Best regards,
Claus
