Speculation tax on mixed donation
December 1, 2014 | 35,00 EUR | answered by Tobias Heinrich
Dear Sir or Madam,
In 2010, my parents built a house and rented it to my husband and me. Now we would like to buy it, but we would incur speculation tax as the current market value is approximately 350-400,000 euros. There are still 270,000 euros in debt to be paid, which we would like to take over. What options are there for transferring ownership without paying gift tax, speculation tax, or similar taxes? Would a mixed gift possibly be suitable for us?
Thank you for your response!
A.M.
Dear inquirer,
In the context of an initial consultation and your fee commitment, while observing the regulations of this forum, I would like to answer your question.
First of all, the situation as I understand it: Your parents have built a house and now want to sell it to you. The time of acquiring the property falls within the speculation period. The construction was financed by a loan, with an outstanding debt of 270,000.00 €.
Based on this situation, here is my response:
Option 1 Purchase: You provide a consideration equal to the value of the property (including the house). This results in a speculative gain, simplified as the difference between the selling price and the acquisition and construction costs, increased by tax-deductible depreciation.
Option 2 Gift: You provide no consideration. This may incur gift tax, depending on previous gifts and expected future gifts/inheritances. The loan remains with the parents. Currently, there is a tax-free allowance of 400,000.00 € for a gift from a parent to a child.
Option 3 Mixed Gift: This means that while you provide some consideration (such as taking on the loan, additional payments), it is not equal to the property value, but less. The split is done proportionally. For example, if you provide 1/3 of the property value as consideration, one-third is considered a purchase and income tax is due according to Option 1. Two-thirds would be considered a gift, potentially incurring gift tax as described in Option 2.
Option 4 Parental self-use: If your parents decide to live in the house themselves initially, a tax-free sale afterwards could be possible. Considerations should be made regarding potential tax evasion.
Option 5 Waiting out the speculation period: If the sale occurs 10 years after acquiring the property, generally no income tax would be due.
My urgent recommendation: Allow me or one of my colleagues (a tax advisor) to provide you with a thorough and paid consultation. This will likely cost more than 35.00 €, but is an investment that typically pays off. It is important to question all motives (transferring the property, transferring assets, need for liquid funds, etc.) and assess the actual situation (when did the speculation period start).
In my opinion, any decision made without such consultation could potentially be disastrous.
I believe this addresses your initial question, although probably not with the desired tax result.
Best regards,
Tobias Heinrich
