In the context of inheritances, ownership shares of a property are often transferred – for example, if the child inherits half of the parental home as a co-owner. But what can you do with half a share? Does this have the same value as the arithmetical share of the market value of the whole house?

The Münster Fiscal Court had to deal with this question. The plaintiff inherited half of a property. As part of the provisions of the Valuation Act, the tax office determined an inheritance tax value of 270,000 euros for the entire property. It set 50 percent, i.e. 135,000 euros, for the heir.

He took the opportunity to prove a lower market value in accordance with § 198 of the Valuation Act and had a valuation report prepared by the local appraisal committee. This came to a total value of 150,000 euros. This value was accepted by the tax office.

However, the expert committee went even further and did not apply the arithmetical share of the market value, i.e. 50 percent of 150,000 euros, i.e. 75,000 euros, but took into account a discount of 20 percent and valued the co-ownership share at only 60,000 euros.

Half a house comes with risks

The reason given by the committee was that the acquisition of a co-ownership share was associated with considerable risks such as limited power of disposal. Based on existing experience from foreclosures, the committee considered the 20 percent discount to be justified.

Since the tax office did not follow this view, the Münster Finance Court had to decide on this in its judgment of 24 November 2022 (3 K 1201/21 F.). The tax court came to the conclusion that the discount of 20 percent was sufficiently justified.

The appeal was allowed because the Federal Fiscal Court has not yet ruled on this issue. In the case of inheritances or gifts of co-ownership shares in real estate, a possible valuation discount should be examined and the corresponding notices should be kept open until the final decision of the Federal Fiscal Court.