ᐅ Tax Advice on Land Registry Entry

nordbayer schrieb:

So in the fictional example, the woman would have to sell the land to him at its fair market value to avoid gift tax?

Not exactly. For tax purposes, the value of the land is still based on the standardized land value. If the sale price is below that, it is considered a partial gift and split into a compensated and an uncompensated part. Gift tax applies to the uncompensated portion, unless the assumed debts cover it.
Also, it’s important to remember that in a hypothetical sale, this could have income tax implications for the woman as well.

So now income tax as well? During your "consultation," there was no mention that one would also have to consider income tax here, only gift tax and property transfer tax/planning permission fees! I can see you now agree that it is easy to make mistakes in the structuring here.

Another hypothetical example: The woman’s property has a tax value of 400, she bought it for 600 two years ago. There is still a 500 loan outstanding. She sells half of the property to the man for 300, which the man transfers to her. Could a grumpy tax officer issue a tax assessment for 100 gift tax from the man to the woman, because the man paid 100 more than the tax value?

A house worth 400 is to be built on the property. Assuming the man cannot simply transfer her 300. The man and woman convert the loan into a joint loan with joint and several liability and increase the mortgage on the property to 900. How is the gift tax now calculated for the property share?

Or do they necessarily have to take out two separate loans, both secured by the same mortgage? How can you properly finance a house construction without gifts using two loans with corresponding withdrawals?

nordbayer schrieb:

So now income tax? Previously, your "consultation" only mentioned that you basically only need to consider gift tax and property transfer tax here! I see you now agree that there is a lot that can be done wrong in planning this.

Of course income tax wasn’t mentioned before, because the original poster didn’t ask about it. Besides, you still don’t necessarily need a tax advisor for this; a notary knows all of this too. And last but not least, this is not advice but simply the observation that this situation is not so complex tax-wise that a tax advisor is absolutely required. A notary, as mentioned, is completely sufficient.
And no one ever claimed that you don’t need any advice at all. But I would focus on questions that a tax advisor cannot answer, but a notary can.

nordbayer schrieb:

Another hypothetical example: The woman’s plot of land has a tax value of 400, she bought it for 600 two years ago. There is still a 500 loan outstanding. She sells half to the man for 300, which the man transfers to her. Could a grumpy tax officer issue a tax assessment for 100 in gift tax from the man to the woman, since the man paid 100 more than the tax value?

I really don’t see how this relates to the original poster’s question anymore. What are you actually asking now?!
There is no such thing as a “tax value” as you call it. No, it would be the (possible) capital gains calculated based on the purchase price, not the official land value. That’s fair, after all; why should he pay less than half? The “tax value” you mention and the real market value are not the same.

If you mean to fake a transaction to avoid gift tax – that would be tax evasion. One should seriously consider if marriage is not the better alternative.

nordbayer schrieb:

A house worth 400 is going to be built on the land. The man and woman convert the loan into a joint loan with joint and several liability, and increase the mortgage to 900. How is the gift tax calculated for the land share now?

Or do they have to take out two separate loans secured by the same mortgage? How can a house be properly financed from two loans with corresponding withdrawals without triggering any gifts?

For gift tax purposes, only the land and any debts taken over related to it matter in the first place. Everything that happens afterward (building the house, increasing the mortgage) is irrelevant for gift tax, at least.

What can still be “risky” without marriage, as mentioned, is the inheritance tax in the unfortunate event we all want to avoid.

saralina87 schrieb:

If you mean to create a sham transaction to avoid gift tax—that would be tax evasion.

No, I argue that in this hypothetical case it might be possible to structure it so that effectively no gift takes place, and with some skill no gift tax has to be paid. However, it’s also possible that significant tax amounts must be paid if it is not carried out correctly, assuming ownership arrangements and so on are properly set.

nordbayer schrieb:

No, I argue that it is possible in this hypothetical scenario to arrange things so that effectively no gift is made and therefore, with some skill, no gift tax needs to be paid. However, significant tax payments might be required if it is not handled correctly. Provided that ownership structures and so on are chosen properly.

Look, no offense, but it should be clear that no gift tax applies if the friend buys half from her at the fair market value, right? You really don’t need any further advice to understand that.

For the fair market value or the book value? And how can the person provide the tax office with proof of a specific portion of the loan, i.e. a purchase price payment, when the loan is converted into a joint loan?