Apartment sale, now the tax office is knocking

if I understand correctly, in 2006 it was legally a gift from the daughter to the parents. As far as I know, there are no exemptions for this.

That is incorrect, there are always exemptions, even if they are lower than for the reverse gift. In this case, the exemption would probably be around €20,000. However, a free right of residence could have reduced the value to be applied. I also do not know how the loan assumed by the parents should be accounted for. What comes to mind in this context is that the contracts regarding the acquisition process should be reviewed again to determine whether, from a documentary point of view, it was indeed a pure gift or whether (due to the loan repayments) it was a partially compensated acquisition. A partially compensated transfer could have a completely different tax effect on the 10-year period.

I understood it like this:

2002
Owner Daughter
Financing Parents-in-law
User Daughter


2006 Gift
Owner Parents-in-law
Financing Parents-in-law
User Daughter

Not quite. 2002 is correct so far. I believe there was also a subsidy, so it was under the daughter’s name; she would have been allowed to keep the apartment later.

In mid-2002, however, she moved out. Then her brother lived in the apartment for almost 2 years, and since 2004 it has been rented out to strangers.

I just realized, the apartment was sold in 2015 (August-October). The transfer could also have taken place at the end of 2005. I’ll have the exact dates sent to me. It would be easy if 2002 counts; then it’s definitely more than 10 years.

Not quite. 2002 is about right. I believe there was still a subsidy back then, so it ran through the subsidiary, and she would have been allowed to keep the apartment later.

Sounds like the home ownership allowance, which no longer exists since 2006.

But she moved out in mid-2002. Then her brother lived in the apartment for almost 2 years, and since 2004 it has been completely rented out to third parties.

Whether the 2 years of owner-occupation are actually met depends on whether the brother counts as well. I don’t know that and would have to research it. Then it would also depend on the exact period and whether this is taken into account when transferring to the legal successor through the gift. I would also have to research that.

I just noticed, the apartment was sold in 2015 (August–October). However, the transfer could also have already taken place at the end of 2005. I’ll have the exact dates sent to me. It would be easy if 2002 counts; then it’s definitely more than 10 years.

As I said, what would be important is whether it is actually a gift. The notarial deed from 2006 should actually provide information on this. Then the case would indeed be quite simple.
If it is not a gift, then the question remains, what amounts are we actually talking about for 2002, 2005/06, and 2015/16?

Has the apartment increased significantly in value? I believe the tax on the speculation profit will actually be the smaller item. On the profit, in the worst case, there are 25% plus solidarity surcharge and that’s it. Simplified example: 150K€ became 200K€. 25% on 50K€ is 10K€ tax.
The gift from daughter to parents is more interesting, since everything over 20,000€ in value must be taxed (tax declaration class 2). Plus interest from the time of the gift.
150K€ minus 20K€ = 130K€ x 20% gift tax (value of the gift assumed between 75-300K€) = 26K€.
On top of that, interest.

The fact that they are contacting now is no coincidence, I mean the statute of limitations is 10 years.

You urgently need to see a tax advisor.

The parents-in-law have already been to the tax advisor. All documents are also there.

The parents have also guaranteed from the beginning.

I only know approximate values. The purchase must have been around 140,000 DM, the sale 90,000 euros.

Then the gift should be below the exemption amount.

And taking ancillary purchase costs into account, not that much remained in the case of purchase/sale either. But a tax advisor is definitely a good contact.