In its judgment of 18 December 2014 (Az. 7 K 1377/14), the 7th Senate held that the costs of clearing out a house belonging to the estate do not constitute deductible estate liabilities and are not deductible for inheritance tax purposes as costs of administering the estate. The claimant inherited from his deceased uncle as his nephew. The estate included, among other things, the residential property that the decedent had used himself during his lifetime, which was sold after his death for approximately EUR 56,000. Because the decedent was a so-called "hoarder," the house had to undergo extensive clearing before the sale, resulting in costs totaling EUR 17,569. The tax office refused to deduct these clearing costs in the inheritance tax assessment. The tax court dismissed the action. According to the court, the clearing costs were neither incurred by the claimant directly in connection with the settlement, administration or distribution of the estate, nor with the acquisition of the inheritance. In the Senate's view, these costs instead form part of the non-deductible costs of administering the estate. The fact that the cluttered property could not be put to reasonable use by the heir without prior clearing may have been a practical obstacle to the subsequent sale. However, this condition did not prevent the heir from legally taking up the undivided inheritance of the property. Leave to appeal was not granted.
Frequently asked questions
Frequently asked questions
Are clearance costs for a inherited house deductible as estate liabilities?
No. According to the ruling of the Finanzgericht (Tax Court) of 18 December 2014 (Az. 7 K 1377/14), clearance costs for a house belonging to the estate do not qualify as deductible estate liabilities within the meaning of § 10 Abs. 5 ErbStG. Instead, they constitute non-deductible costs of estate administration.
Why are clearance costs considered estate administration costs rather than acquisition costs?
These costs are not directly connected to the settlement, regulation, or distribution of the estate, nor to the acquisition itself. The heir was legally able to accept the property even in its cluttered condition; the clearance merely served the subsequent use or realization and therefore constitutes ongoing administration.
Which estate-related costs are generally deductible for inheritance tax purposes?
Under § 10 Abs. 5 Nr. 3 ErbStG, deductible costs are those directly related to the settlement, administration or distribution of the estate, or to the acquisition of the inheritance — for example funeral costs, costs of obtaining a certificate of inheritance (Erbschein), and costs of estate settlement. By contrast, ongoing costs of managing the estate are not deductible.
Does it matter that the waste removal was necessary for the sale of the house?
No. Even if the waste removal was, in practical terms, a prerequisite for any meaningful use or sale of the property, this does not affect its classification under inheritance tax law. What matters is that the heir was legally able to accept the inheritance without prior waste removal.
Was an appeal allowed against the tax court's ruling on clean-up costs?
No, the tax court did not allow an appeal. The decision therefore stands: clean-up costs for a hoarder's house do not reduce the inheritance tax base.