Tax tip real estate: Note the speculation period!

BWhen selling a property held in private assets, the so-called speculation tax should be kept in mind. If the period between purchase and sale does not exceed ten years (the so-called speculation period), this is a private sale. Consequence: The profit from the sale has to be taxed; it is subject to the personal progressive income tax rate. The date of the effective sales contract is decisive.

In the case of a given (rented) property, the deadline depends on when the previous owner acquired it. Because the time of ownership of the previous owner is attributed to the purchaser. This also applies to inheritance. It can get more complicated with a community of heirs. The mere division of the inheritance between the heirs does not count as an alienation. However, as soon as severance payments are made, there may be a payment process in which the speculation period must be observed. The same applies to the assumption of liabilities. Incidentally, the speculation period begins anew with the paid acquisition.

Caution is also advised when holding real estate through an asset management partnership. In terms of income tax, this is not only relevant if the company sells the real estate itself, but also in the event of a change in the partnership’s portfolio within the ten-year period: for example, if another person joins or shareholders undertake a capital increase. This can lead to a fictitious partial sale of the property. Important: Here, the individual shareholders themselves are obliged to state the (proportionate) capital gains in their income tax return. The Federal Fiscal Court recently referred to this (judgment of November 19, 2019, IX R 24/18).

Incidentally, if the property is only used for your own residential purposes between purchase and sale, the sale remains tax-free. The same applies if it is used continuously for personal residential purposes in the year of sale and in the previous two years.

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