Which cut-off date is decisive for determining the acquisition costs of land and buildings was assessed by the Münster Tax Court in the following dispute:
In the case at hand, the plaintiff acquired a property with a multi-family house on 17 November 2017 by way of a notarised purchase agreement for EUR 2,400,000. According to § 2 of the purchase agreement, EUR 400,000 was attributable to the value of the land and the remainder to the building. Pursuant to § 4 of the purchase agreement, the transfer of risks, benefits and burdens was to take place on the day following full payment of the purchase price. Full payment of the purchase price was made on 29 March 2018. With regard to the value ratios between land and building, the plaintiff took the view that the oral purchase agreement was decisive. The tax office did not follow this view and therefore obtained the opinion of a third-party expert, who was to determine the values for the land and the building at three different points in time. Namely, first, the time of the original oral agreement, the time of conclusion of the contract, and the time of the transfer of risks, benefits and burdens. The values determined for the land and the building deviated significantly from the values agreed in the contract.
Ruling of the Münster Tax Court
In the view of the Münster Tax Court, the decisive value ratios in this dispute are those on the day of the transfer of risk. As a matter of principle, the day of delivery is to be taken into account for the assessment of acquisition costs; in the case of real estate, this is generally the time of the actual transfer of possession, risk, benefits and burdens. In the present dispute, the relevant cut-off date would therefore be 30 March 2018. However, the Münster Tax Court has admitted an appeal, as differing views exist regarding the relevant cut-off date.
Frequently asked questions
Frequently asked questions
Which reference date is decisive for allocating the acquisition costs of real property?
According to the FG Münster, the decisive date is the day on which possession, benefits, risk, and encumbrances are transferred. For real property, this generally corresponds to the date of actual delivery, not the date of notarization or any earlier oral agreement.
Why is the date of the notarial purchase agreement not decisive for the purchase price allocation?
For assessing acquisition costs, the date of delivery is decisive. For real estate, this is the date on which possession, benefits, risk, and burdens actually pass to the buyer. The notarial signing initially only creates the contractual obligation.
Are the values agreed in the purchase contract for land and building always binding?
No. If the contractually agreed values deviate significantly from the actual market values, the tax authority may review the allocation and, if necessary, correct it by means of an expert appraisal. The decisive factors are then the real value ratios as of the date of transfer of risk.
Has the question of the relevant cut-off date for purchase price allocations been clarified by the highest courts?
No, the legal question has not yet been conclusively clarified. The Münster Tax Court expressly allowed an appeal due to differing views on the relevant cut-off date. Taxpayers should therefore keep corresponding assessment notices open where appropriate.
What is the tax significance of allocating the purchase price between land and building?
The allocation is decisive for the amount of depreciation, as only the building portion is depreciable and can be claimed as income-related expenses or business expenses via AfA (depreciation for wear and tear). A higher building portion results in a higher AfA volume and therefore a lower tax burden.