Heirs obliged to declare their share of a property sale

The sale of a property in an undivided inheritance obliges each of the heirs to declare the capital gains relating to their share, even if the total value of the sale goes to only one of them, explains the tax authorities. At the origin of this understanding of the Tax and Customs Authority (AT) is one of the beneficiaries of an inheritance in which no division has yet been made, and one of the assets of this undivided inheritance (in this case a property) has been sold.

The taxpayer´s question was whether he could be the only heir to declare the sale in his personal tax return and pay the full amount of the capital gains tax on this transaction.

In its reply to this request for binding information, the Tax Authorities state categorically that the onerous transfer of rights in rem in immovable property ‘made in the context of an undivided inheritance requires each of the heirs to declare the gains obtained in relation to the ideal share to which they are entitled in the respective inheritance’.

In the case in question, the taxpayer (who, together with his two brothers and his mother, is one of the beneficiaries of the undivided inheritance) will therefore only be able to declare 12.5 per cent of the total amount received from the sale of the property, with capital gains tax also being calculated on the basis of this share.

In the same way, says the AT, the deduction of the costs of the commission of the real estate agent who brokered the sale is also limited to the proportional value of his share, i.e. the aforementioned 12.5 per cent.

In the explanatory memorandum to this binding information, the taxpayer states that he was the sole beneficiary of the sale of the property in question, by agreement of all the heirs, and is willing to prove that this was the case. Even so, and using existing legislation, the AT concludes that this is not possible.

In the same binding information, the AT does, however, distinguish between the sale of an asset in an undivided inheritance and the receipt of rents, and in the latter case, if there is an agreement, it may be possible to impute the income to just one owner.

‘In the case of rents obtained from assets in an inheritance, if all the heirs agree that these rents should be attributed to a single heir, it is acceptable for the tax declaration of this income to be limited to the actual holder of the income, provided that this is proven by documentary evidence,’ says the AT, distinguishing this situation from that in which the income is obtained from a transaction.

Source: Idealista/news