Entitlement to depreciation after acquisition of shares for consideration, BFH ruling of November 14, 2023 - IX R 1/12
I. At a glance
The ruling of the highest tax court from November 14, 2023 (Ref.: IX R 1/12, NV) confirms the current case law on the determination of depreciation assessment bases, in particular the Senate rulings from May 3, 2022 - IX R 22/19. This amount shows the main points of the confirmations.
With the ruling from 2023, the IX Senate once again recognizes that the acquisition of a share in an asset-managing partnership means that the associated assets of the company's total assets for income tax purposes are acquired on a pro rata basis. The assumption of pro rata debts increases the purchase price for the acquirer to the extent that the liabilities of the partnership for the acquisition or production of assets that can be depreciated, such as buildings, no longer apply.
Furthermore, the BFH ruling confirmed that, in the case of the pro rata acquisition of developed land as part of a partnership's joint assets for income tax purposes, the pro rata acquisition costs must be reallocated to land and buildings.
If the partner of an asset-managing partnership has acquired his share in return for payment, he can only claim depreciation on the depreciable assets of the joint assets acquired on a pro rata basis in accordance with his acquisition costs. The depreciation rate is based on the remaining useful life of the respective asset at the time of the acquisition of the share or on the statutory standardization.
II. In detail
When acquiring shares in an asset-managing partnership for consideration, the acquirer needs to understand how future depreciation is calculated. If the partner already has a share in the partnership (20% in the case at hand), the depreciation for this share is continued according to the previous principles. No adjustment is made for the share that the partner already owned before the additional acquisition.
Depreciation is only recalculated for the additional share acquired against payment (in the case of the ruling, 70% from the father and 10% from the sister) if it can be assumed that the purchase price payment was at arm's length.
The purchase price plus the liabilities assumed is used to determine the basis of assessment. The liabilities are only used if depreciable assets such as buildings were produced or acquired by the partnership with these liabilities.
The purchase price for consideration increased by the liabilities assumed must be allocated to land and depreciable buildings in relation to real estate assets, as depreciation can only be recognized on the building.
The amount of depreciation is based on the remaining useful life. If this is less than the standardized depreciation rates in Section 7 of the German Income Tax Act (Einkommensteuergesetz) of, for example, 50 years or 2% for buildings, higher depreciation can also be applied on the basis of a shorter remaining useful life.
III Recommendation
The ruling has not yet been published in the Federal Tax Gazette and is therefore not applicable beyond the case in question. Nevertheless, the ruling confirms key points of the previous case law published in the Federal Tax Gazette and can be applied in practice. The ruling makes it clear that, before acquiring shares, the assets relevant to depreciation should be reviewed in terms of reason and amount. It regularly makes sense to carry out the tax analysis before concluding the contract in order to be able to determine the division of land and buildings for real estate assets in the purchase contract, for example.
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