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Taxation of the purchase of an agricultural field after the partition auction

May 14, 2015 | 40,00 EUR | answered by Anton Pernitschka

A and B bought a farmstead and several meadows in 2011, each for 1/2.

One meadow and the green area of the farmstead were officially self-managed. A and B received operating premium, compensatory allowance, and VNP by having a business number and registering with the AELF.

The other meadows were assigned to leasing and renting (V&V).

After 3 years, B terminated the joint ownership and applied for partition auction (TV) to dissolve the community. A bought a meadow for agriculture (LW) among other things. A also had to pay property transfer tax only for the newly acquired 1/2 share.

A third party bought the farmstead.

1) The tax office now considers A's purchase of the agricultural land as if it had been bought by a stranger. They want to fully tax the profit that A caused himself (the profit only arose from the purchase "from oneself"). Is this permissible?

2) In order to apply for TV, the GbR must be terminated beforehand! It is now questionable whether the agricultural operation was already terminated before the TV.

3) After the purchase, A was able to TAKE OVER the ongoing subsidies from the Office for Agriculture (AELF) with a new business number. So the question arises here as well whether it was an abandonment of the business? Or whether A actually continued the operation, as the meadow was a significant part of the agricultural operation?

Which of these considerations is correct and where can it be read how this sale is to be taxed?

Anton Pernitschka

Dear inquirer,

as part of an initial consultation and your fee commitment, in accordance with the rules of this forum, I would like to answer your questions.

A partition auction can be understood as an enforcement procedure. The applicable law is therefore also enforcement law.

The proceeds from a partition auction are to be distributed among the participants according to their (ownership) shares. If in the present case A and B were each 50% involved, the proceeds will also be distributed equally among the co-owners. The profit share of 50% would then be fully taxable for A.

A partition auction of a property owned by a GbR can only be applied for by each partner after the termination of the partnership. This regulation applies in the present case if it concerns agricultural business properties.

Based on the facts, A acquired the meadow from a partition auction. Therefore, it can be assumed that there was a cessation of business prior to this. In this case, A will not continue the previous business.

The answer was provided based on the information you provided. Missing or incorrect information about the actual circumstances can affect the legal outcome.

Best regards,

Anton Pernitschka
Tax advisor