BFH: Capital gains on real estate transfers with assumption of liabilities

Oct 30, 2025

The Federal Fiscal Court (BFH) has ruled that a taxable private sale transaction exists
if a property is transferred within ten years of acquisition and the new owner assumes the liabilities encumbering the property.

In the case in question, a property was purchased for €143,950 and partially financed by loans. Five years later, the father transferred the property to his daughter. The value of the property at the time of transfer was €210,000. The liabilities on the date of transfer amounted to €115,000. These were assumed by the new owner, the daughter.

The tax office divided the transfer into a paid and an unpaid portion based on a market value of €210,000. The tax office taxed the paid transfer with assumption of liabilities as a private sale and assessed the corresponding income tax against the father. The father filed a lawsuit against this.

The Federal Fiscal Court (BFH) confirmed the taxation of a property transfer with the assumption of debts. In the case in question, the transfer was partially for consideration, so that it had to be divided into a part for consideration and a part without consideration. If the property is transferred within ten years of acquisition, the transaction is subject to income tax as a private sale transaction with regard to the part for consideration, according to the BFH's decision.

Source: Federal Fiscal Court, judgment of March 11, 2025 – AZ IX R 17/24