House sale with gift tax for those holding a security mortgage.
September 21, 2010 | 50,00 EUR | answered by Oliver Burchardt
Good evening:
Situation: I own a house that is being sold for Euro 350,000 due to its condition and current situation. The house was valued at Euro 720,000 by the bank in 2008.
There are mortgages in the 1st rank: Euro 210,000, Euro 45,000, Euro 50,000, and Euro 20,000 KFW. These mortgages are in my name as the owner and seller.
Due to an inheritance agreement, there are 2 additional security mortgages in the 3rd rank of Euro 250,000 each. These belong to my siblings.
Initially, the siblings agreed to the sale. The notary appointment has already taken place, but now the siblings, who are in the 3rd rank in the land register, no longer want to sign.
Reason: GIFT TAX! Is it possible that my siblings have to pay gift tax? On what amount: On the remaining amount that is split equally between the siblings or on the amount they originally secured. The value of the house has fallen drastically, so the aforementioned 3rd rank security is almost nonexistent.
I request a quick response, as the BUYER is pressuring and threatening to pull out!
Thank you
NvS
Dear inquirer,
Thank you for your inquiry, which I would be happy to answer as part of an initial consultation.
In answering your question, I assume that the situation is such that the house owned by you is being sold, and you are obligated to pay a portion of the proceeds to your siblings as per the inheritance contract. In this context, the security mortgage seems to serve the purpose of enabling your siblings to enforce their claims against you.
Firstly, it needs to be verified whether the inheritance legacy specified in the inheritance contract has already been taxed or should have been taxed. However, knowledge of the inheritance contract is a prerequisite for this assessment.
If the inheritance contract does not contain any provisions, your payment to your siblings would result in a gift inter vivos, which would be subject to gift tax.
In any case, a tax claim arises from the tax office against your siblings in your situation. However, it is questionable on what basis this claim arises. This question is not only of academic significance but is particularly relevant for the valuation (depending on the design, the original valuation or the current value of the gift may be decisive) as well as the question of the applicable tax-free amounts. Therefore, the amount of the tax claim is uncertain.
Unfortunately, in a forum like this, lacking knowledge of the contracts and in view of the complexity, your question cannot be definitively answered, as further examinations, especially of the inheritance contract, are necessary.
I recommend that you seek advice from a colleague locally. I am also available for further consultation, and I would credit the amount paid here.
I hope that despite the inherent limitations, I have been able to help you further.
Best regards,
Oliver Burchardt
Tax Advisor
