Rental value of a retirement flat: Special edition

In the transfer of an agricultural and forestry holding, the transferee often assumes a notarial obligation in rem to provide the previous owner with lifetime maintenance benefits of various kinds, e.g. by providing a retirement flat, including the costs of benefits in kind such as heating, water, electricity, maintenance costs, etc., depending on the exact terms of the contractual obligations undertaken by the transferee.

In the present case, the transferee had claimed not only the costs of benefits in kind, such as the aforementioned ancillary costs, as special expenses in their income tax return, but also the value of use of the retirement flat.

The tax office (FA) refused to recognise the value in use. The Nuremberg Tax Court (FG), however,

did not concur with the administrative view and ruled that not only the ongoing material expenses are deductible as special expenses, but also the value in use. In its reasoning, the court stated that, in its view, the present case was comparable to a situation where one spouse provides the other with accommodation free of charge following a separation. In such a case, the spouse could claim this maintenance in kind granted to the separated spouse in full as a special allowance in their income tax return.

The tax office has already lodged an appeal against the Tax Court’s decision with the Federal Fiscal Court. In similar cases, taxpayers should therefore seek tax advice and lodge an objection against tax assessment notices in which benefits in kind are not recognised as special expenses.

Source: Nuremberg Finance Court, judgment of 6 February 2025 – Ref. 4 K 1279/23