Private property used commercially at half the time.
March 22, 2011 | 50,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
I have had a private single-family house since 1983 and a flower shop in it since 1991, which was expanded in 1998 by a pavilion built with my own resources. The pavilion was not taken over into the business assets and also not depreciated. I do not intend to include it in the business assets in order to avoid having to pay taxes for my own work and private investment in case of business closure (I am 63 years old). The tax office now wants to determine the share of my house and land that is used for business purposes. How can I prevent my half-built and paid-for house from being included in the business assets? In the 20 years of my business, the business profit has not been reduced by depreciation. In 2010, I had my wife entered into the land register. By the way, I am a small business owner, not a business reporting entity, determining profits according to §4 para 3 EstG. What can I do? Sincerely yours
Dear Seeker,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your commitment in an initial consultation as follows:
A building or a part of a building including the associated land can belong to:
1. Necessary business assets OR
2. Voluntary business assets OR
3. Private assets
If a part of a property along with the proportional land is used for business purposes, it constitutes necessary business assets. This also applies when preparing an income-surplus calculation according to § 4 paragraph 3 EStG.
Since you use a part of the building (the property) for operating a flower shop within a sole proprietorship, it is indeed used for business purposes, so necessary business assets are present. According to R 4.2 paragraph 8 of the income tax guidelines, parts of the property used for business purposes do not need to be treated as necessary business assets if they are of minor importance. Minor importance is given if the value is not more than one-fifth of the fair value of the entire property and not more than 20,500 euros (§ 8 EStDV), which is probably not the case for you. Subject to a detailed examination of the facts, in your case, it will unfortunately have to be assumed that the tax office is correct and necessary business assets are present.
However, necessary business assets are only present to the extent to which the property is attributable to you as a sole proprietor. Assuming based on your information that the building is used for business purposes 50% of the time, but you only own half of the property as a co-owner since 2010, then in 2010 a proportion of 25% is used for business purposes.
You may be able to prevent the taxation of the hidden reserves of the building part by renting out this flower shop to another entrepreneur who operates a flower shop as part of the business closure. Alternatively, you could rent out the building part for residential purposes to unrelated parties, in which case voluntary business assets would be present, which also would not trigger taxation.
Before making such arrangements, you must discuss the details with a tax advisor. A tax advisor should also be consulted at this stage!
I hope my information is helpful.
Sincerely,
Ulrich Stiller
Tax advisor / Business graduate
