Income-related expenses are expenditures incurred to acquire, secure and maintain income (§ 9 Abs. 1 S. 1 EStG). Accordingly, such expenses are also deductible in advance to acquire income (e.g. application photos, etc.). However, a prerequisite for the tax recognition of income-related expenses is a sufficient factual and temporal connection with the income.
In light of these requirements, the question arises whether, upon the transfer of real property (e.g. to one's own children) subject to a reserved usufruct, the new owners can already claim income-related expenses in advance (e.g. depreciation, financing interest, etc.), even though they have not yet generated any income from the property. This is because the usufruct grants the former owners the right to use the property and to collect rents and leases in connection with it. The BFH has denied the prior deduction of income-related expenses in connection with a property transferred subject to a reserved usufruct. The reason is that there is no temporal connection with the income from renting and leasing, since the end of use under the usufruct cannot be precisely foreseen.
Note: Deductibility of income-related expenses in the case of a usufruct
A deduction of anticipatory income-related expenses in connection with a transferred property subject to a reserved usufruct is therefore only possible if the end of the usufruct is foreseeable and the new owner clearly incurs the expenditures with a view to the imminent use of the building to generate income. If the end of the usufruct is not foreseeable, it is advisable that the usufructuary continue to bear the income-related expenses associated with the income.
Frequently asked questions
Frequently asked questions
Can new owners deduct income-related expenses in advance under a reserved usufruct?
No, the BFH denies the deduction of anticipated income-related expenses by the new owner when the property has been transferred subject to a reserved usufruct (Vorbehaltsnießbrauch). The required temporal connection with future rental income is missing, since the end of the usufruct cannot be foreseen.
When are anticipated income-related expenses exceptionally deductible in cases of usufruct?
A deduction is possible if the end of the usufruct is concretely foreseeable and the new owner incurs the expenses recognizably in view of the upcoming personal use for generating income. Both conditions must be met cumulatively.
Who should bear income-related expenses if the end of the usufruct is not foreseeable?
In this case, the usufructuary should continue to bear the income-related expenses, as only they currently generate the rental and leasing income. This is the only way to ensure that the expenses are tax-deductible.
What are the general requirements for deducting pre-acquisition income-related expenses (vorweggenommene Werbungskosten)?
Under § 9 Abs. 1 S. 1 EStG, expenses incurred to acquire, secure, and maintain income are deductible as Werbungskosten. Pre-acquisition expenses are likewise deductible, provided there is a sufficient factual and temporal connection to the later income.
Which expenses are typically affected in usufruct transfers?
Affected items are primarily depreciation (AfA) and financing interest incurred by the new owner for the transferred property. During the term of a reserved usufruct, these expenses generally cannot be claimed for tax purposes by either the usufructuary or the new owner, unless an exception applies.