Real Estate: Take Advantage of Tax Benefits: New Ruling Favors Selling Homes Within the Family
If parents sell a property to their children and agree to an interest-free installment payment, no taxable capital gains arise. The Federal Tax Court changes its case law.
For years, real estate buyers and builders in various German regions have complained about high land prices and construction costs. Those fortunate enough to purchase a developed piece of property within their family often negotiate agreements that lessen the burden on buyers while still securing the actual value for sellers. However, tax-wise, these parties must be cautious to avoid unpleasant surprises.
Such was the case for a married couple whose appeals were recently heard by the Federal Finance Court (case number VIII R 30/24).
The couple sold a developed land plot to their daughter. They agreed that the purchase price would initially be postponed, with payments scheduled to begin in May 2021. However, no interest was to be accrued. The parents considered the discounted purchase price, resulting from this arrangement, as a gift to their daughter. Consequently, they did not declare any interest from the installment payment agreement in their income tax returns for the years 2021 and 2022.
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