BFH ruling: Taxes for the home in the event of divorce?

How does the tax office assess the sale of the home in the event of divorce? That depends on the situation: If one partner sells his or her share to the other, there may be a taxable sale transaction with expensive consequences for the seller.

The Federal Fiscal Court has ruled (BFH, 14.02.2023, IX R 11/21): If the divorced spouse sells his or her co-ownership share in the joint single-family house to the former spouse as part of the property settlement on the occasion of the divorce, the sale may be subject to taxation as a private sale transaction.

The person concerned had purchased a single-family house together with his former wife in 2008 and initially lived in it with their common child. After the marriage fell into crisis, the husband moved out of the property in 2015. The wife remained in the property with the child. The marriage was subsequently divorced.

In the course of the property settlement in the divorce proceedings, a dispute arose between the separated spouses about the property. After the wife had threatened the plaintiff with auction, the husband sold his half co-ownership share to the wife in 2017. The wife continued to use the property with the child for her own residential purposes.

The tax office subject the profit from the sale of the co-ownership share to income tax. The BFH confirmed this opinion. A taxable private sale transaction exists if a property is acquired and resold within ten years. This also applies to a half co-ownership share that is sold by one co-owner to the other in the course of property division after a divorce.

The sale of a property is not taxed if the property is used continuously for own residential purposes between acquisition and sale or in the year of sale and in the two preceding years. However, a spouse in the process of divorce no longer uses the real estate property for his or her own residential purposes when he or she has moved out.

(Photo: © Daniel Schwarz, csm Federal Supreme Finance Court)