Private asset management or commercial trading?
April 17, 2019 | 300,00 EUR | answered by Steuerberater Knut Christiansen
My husband and I have owned several rented multi-family houses for more than 10 years. One was sold in December 2018, another one will be in May 2019.
Question: Can we sell a total of three properties each with a 50% co-ownership stake within 5 years as part of our private asset management (no commercial trading)? Or can we as married couple each sell three properties?
If the second option applies: Can we transfer one to three additional properties to each other before selling them after the sale of three properties without tax consequences? Or would we have to transfer internally before the second and third sale to increase the total number from 3 to up to 6, so that only one partner has sold at a time? Or would such previous internal transfers be considered harmful?
Note: no extraordinary modernizations have been carried out on all properties before the sale?
Last question: Is it harmful for speculation tax reasons if losses from V+V have been claimed for 10 years on one property, but then the property was sold at a profit?
Good day and thank you for your inquiry, which I would like to answer as follows as part of an initial consultation.
In principle, when examining commercial real estate trading, it needs to be determined whether it qualifies as an object according to the 3-object limit. According to the BMF letter (tax office administrative instruction), a property that has been rented out for more than 10 years is not considered an object in this sense and is not counted.
If it is an object according to this limit, co-ownership interests are also counted. So, if you sell 3 properties in which you and your spouse were each 50% involved, you each reach the personal limit.
To increase the limit from three to six, you should transfer in advance. A transfer to the spouse, who then sells shortly after, could be seen as abuse of design. This applies to properties that have not been held for 10 years. You can find the mentioned BMF letter with an examination scheme here: https://datenbank.nwb.de/Dokument/Anzeigen/129733/
Regarding your third question: it is generally not harmful to sell a property after > 10 years (at a profit) if it only incurred losses before. It is more important whether the tax office has a provisional note regarding the income-generating intention for this property in the tax assessment.
I hope I have answered your questions, if not, feel free to ask more questions for free. You can also reach me via email at k.christiansen@ihr-kanzleihaus.de, as the questions on this page are limited to 1.
I will be difficult to reach due to an upcoming flight, so please understand if my response may take a bit longer.
Best regards,
Knut Christiansen
Tax consultant
