Sale of ownership shares in condominiums after a separation
April 26, 2020 | 100,00 EUR | answered by Steuerberater Knut Christiansen
My ex-partner and I have acquired several condominiums together and rent them out as a GbR (civil law partnership). Due to our separation, we now want to divide the apartments. Currently, each of us holds 50% of the GbR and also of the apartments according to the land register. We would like to sell or exchange these shares for the apartments to each other. The sale should ideally be completed by the end of this year. We want to resolve the situation promptly. A gift is also possible. The goal is to incur as little real estate transfer tax as possible. Here are our questions:
1) Can we possibly gift the apartment shares partially (I have seen here that 20,000 EUR can be tax-free in 10 years)?
2) Do the 20,000 EUR apply in both directions, meaning he gifts to me once and I gift to him once?
3) How is the real estate transfer tax calculated in this share sale? Does the purchase price according to the notarial contract apply? Are there any costs that we can deduct?
4) Do we need to consider other taxes from the sale (especially income tax)? Except for one apartment, the apartments have not been in our possession for 10 years. What costs can be deducted from a possible sales profit?
5) How does depreciation work after the resale of the apartment shares? Will it be reassessed again? If so, on what basis?
Good morning and thank you for using ask-einen.com!
I would like to answer your questions as part of an initial consultation. Please note that this forum can never replace personal and comprehensive advice, but only serves as an initial tax assessment.
Regarding 1) and 2)
Mutual gifts can be made. However, these must always be independent of each other. In particular, a gift should not be made with the condition that another gift is required in return. The tax-free allowances of 20,000 EUR apply in both directions (once every 10 years).
Regarding 3)
The basis for calculating real estate transfer tax is always the consideration received. This could be the purchase price, assumption of debt, or the value of the exchanged property. In the case of a property exchange, it would be the (proportional) value of the received property. For example, if you exchange properties worth 100,000 EUR each, each of you would have to pay real estate transfer tax on 50,000 EUR (half the value of the other property). Deductions can be made for movable objects that are not permanently attached to the property, such as fitted kitchens or awnings (the objectively traceable residual values).
Regarding 4)
If a profit is made through the exchange, a private sale transaction occurs (even if only exchanged) if the property has been held for less than 10 years and has not been used for self-occupation at least within the last three years before the sale. The profit is the difference between the consideration received (value of half the exchanged property) and the proportional acquisition costs. Income tax must be paid on the resulting profit. This is colloquially referred to as capital gains tax. The income tax is based on the individual's income in the year of the sale (the exchange is considered a sale). Selling expenses, brokerage fees (unlikely in this case), or prepayment penalties can be deducted from the sales profit.
If more than 3 properties are sold, this may be considered a commercial real estate trade. In this case, additional trade tax may apply. Although most of the trade tax is credited against income tax, it can potentially lead to higher taxation.
Regarding 5)
For the acquired share of the property, a new depreciation schedule is created. This is based on the value set at the exchange, dividing it into building and land. The depreciation for this half share is then 2% for 50 years. The original depreciation continues for the existing share. If a portion of the property is gifted, the recipient continues the depreciation of the donor, as there is no acquisition cost in this case. They essentially step into the shoes of the predecessor.
I hope this answers your questions, if not please feel free to reach out again. This platform allows for follow-up questions (which can also consist of multiple questions). I will be happy to assist and respond promptly to your inquiries.
Best regards,
Knut Christiansen
Tax Advisor
