Real estate sale: Transferring an apartment to (in-laws) parents is not tax-exempt

Oct 30, 2025

Profits from the sale of real estate may remain exempt from income tax if the property was occupied by the owner prior to the sale. In its ruling of November 14, 2023, the Federal Fiscal Court (BFH) clarified that allowing a mother or mother-in-law to live in an apartment does not constitute “use for own residential purposes” within the meaning of tax law.

In the case in question, a married couple had let their apartment to the wife's mother free of charge.
After her death, they sold the apartment at a profit. The tax office decided that this profit was taxable because the apartment was not occupied by the owners themselves. The court confirmed this view and emphasized that granting use to close family members such as mothers or mothers-in-law does not fall under the tax exemption. There are exceptions, e.g., if the apartment is transferred free of charge to a dependent child. However, according to the Federal Fiscal Court, this is not comparable to the present case.

Regardless of how the apartment is used, a tax advisor should always be consulted before selling a property.