Sale after donation is not an abuse of the tax system

The donation of an asset to a family member with the aim of shifting the speculative profit from a sale is not an abuse of tax structuring.

If a property owner has initiated the sale of his property, the Federal Fiscal Court is convinced that there is no abuse of legal structuring possibilities if he first transfers the property to his children free of charge and the children then sell the property to the buyer. The speculative gain is then not to be recognized by the original owner, but by the children according to their tax circumstances.

The Federal Fiscal Court came to this conclusion because an abuse of structuring opportunities can only exist if there is no other abuse prevention provision that covers the facts of the case. However, the German Income Tax Act explicitly regulates the sale of an asset after a gratuitous acquisition, which is to be regarded as an abuse prevention provision. Incidentally, although the ruling concerned real estate, it can be applied in exactly the same way to speculative gains from other private sales transactions.