House sale following a divorce – Transferring half a property can release speculative gains
If a property that is held in private assets is sold within the ten year speculation period then the appreciation in value that is realised generally has to be taxed as gains from private disposals. However, if the property was previously occupied by the owner then no tax would be levied if the property was sold within the ten year period. The use for own residential purposes would have to have stretched over either the entire period between acquisition and sale, or have occurred in the year in which the sale took place as well as in the two preceding years.
In the case that got to the BFH (ruling of 14.2.2023, case reference: IX R 11/21), from 2008, a married couple lived together with their son in a SFH that was jointly owned (50:50) by both partners. In 2015, the husband moved out after a marital crisis. The wife carried on living in the property together with their child. Two years later, the husband sold his co-ownership share to his ex-wife after she had threatened to auction off the property in a forced sale. The local tax office taxed the appreciation in value that was achieved as a private capital gain.
The BFH also shared this view; the Munich-based BFH judges pointed out that the husband had used the property for his own residential purposes neither continuously nor in the year in which the sale took place as well as in the two preceding years because he had already moved out in 2015. Admittedly, as the husband had made the property available to his son for use free of charge it was possible to view this as indirect use for own residential purposes. However, the crucial factor here was the use by his divorced wife and this could no longer be regarded as own use by the husband (so-called harmful joint use). A private capital gain could only have been excluded via a state of exigency, for example, expropriation or an auction in a forced sale. There certainly was no state of exigency in the case in question. The divorced wife had indeed exerted considerable pressure on her ex-partner, yet he had ultimately voluntarily sold his share in the SFH to his divorced wife.