Gift - how to properly handle/list

Hello everyone,

currently, there is the idea of buying a house within the family. This was valued at approximately 440,000 euros last year, and we could buy it for 350,000 euros.

The bank with which we want to finance has advised us to state in the purchase contract that the house is worth about 500,000 euros (according to the bank's system, a realistic price), but that the 150,000 difference is a gift. The 500,000 would be important to get a better ratio and better interest rates (since we would build and renovate for 160,000 euros, the total loan is higher than the purchase price of 350,000 euros).

However, a friendly tax advisor has advised against it. Since I have another brother (with whom the plan has been clarified and discussed), he thinks it is stupid to put in writing anywhere that we are being gifted 150,000 euros. Also, my girlfriend and I both want to become owners, and she could not receive her part of the gift tax-free either, so taxes would be due.

What do you think?

Thanks!
Regards

We (the community of heirs) have also transferred a house within the family. This was by no means a simple undertaking. I would strongly advise you to clarify this matter with a notary and a "tax advisor specifically appointed for this case."

The family constellation in your case is not apparent from your text. It is extremely important whether the house comes from an aunt, grandparents, parents, or your children. Depending on this, there are larger or smaller tax exemptions.

What percentage interest does the higher value of the property represent? Spontaneously, I can only recommend that you forgo the "better" interest rates and avoid any risk of gift tax payment. If there are ways to legally circumvent this, I would have this confirmed in writing, not from a forum, but definitely from a notary and tax advisor. Any potential gift tax payment is more expensive in all cases than minimally higher interest rates.

thank you for the answer! the house comes from my father, so the allowance should be around 400,000 euros.

The bank with which we want to finance advised us to state in the purchase contract that the house is worth about 500,000 euros (according to the bank's system a realistic price) but the 150,000 difference is given as a gift.

Stupid bank, find another bank.

It is correct that a bank normally also uses the purchase price as the market value (minus safety discounts as lending value). BUT: This is not a regular purchase, so it must be valued differently or is (normally) valued differently.

If the tax advisor is already skeptical, I would take that seriously. In such cases, it is advisable to present the project very specifically to the tax office through the tax advisor and obtain a - chargeable - legally binding statement for the entire process. One can refer to this in subsequent tax returns.

The statement that comes from there is worth real money.

The statement from the bank is actually nonsense because the loan is based on the market value. The price at which the property is traded within the family is irrelevant. This results from a thought experiment: suppose the house were transferred to you through a normal inheritance - how would one then justify valuing it at only 350K€? That is indeed nonsense and the caseworker at the bank should definitely know this.

Best regards Dirk Grafe

The real estate transfer tax is completely waived. That means you would not have to pay anything for your part. If your girlfriend buys the other half, she would have to pay for it. Unless you get married. And at €175,000, 5 percent real estate transfer tax quickly amounts to €8,750, which would simply be lost. I would also be cautious with gifting. Be sure to get good advice.