Income tax for year of death of the deceased deductible according to Federal Court of Finance
The verdict of the German Federal Finance Court (BFH) of the 04.07.2012 (AZ: II R 15/11) strongly portrayed the point in which the income tax debt for the death year of the departed is actually tax deductible.
GRP Rainer Lawyers Tax Advisors, Cologne, Berlin, Bonn, Düsseldorf, Hamburg, Munich, Stuttgart, Frankfurt www.grprainer.com explain: Consequently, going forward, the debts belonging to the deceased, consisting of church taxes, as well as, the solidarity surcharges, can be subtracted before computation of the inheritance tax by the taxation office.
It is apparent how the heir, determined by §1967 para. 1 of the German Civil Code, is generally accountable and thus responsible for the debts that the deceased left behind, not to mention that any sort of unpaid income tax is recognized as part of this particular debt. These types of debts can, in keeping with § 10 para. 5 nr. 1 of the Inheritance tax law, be deducted from the net worth of the inheritance - ahead of determining the inheritance tax.
The German Federal Court of finance takes the stance that the abatement of taxes does not need to just encompass taxes at the time of passing of life, but also the tax requirements that the passed on person, as a tax payer, had expressed by way of realizing lawful tax discount claims that build up after the calendar year of passing of life. Thus, in line with the BFH, it all depends whether the passed had expressed valid tax write offs in the past year in question. On the flip side, it matters not that the actual taxes build up at the end of the year, fundamentally right after the death of departed. This does not stand against the deadline concept (§§ 9, 11 of the inheritance tax law) in connection with the inheritance tax.
In this specific case, it was vital to the heir for the reason that, following the deduction of the income tax debts for the passing year of the loved one, the heir was required to pay for significantly less inheritance tax. It is definitely advisable for beneficiaries, who were refused the deduction of tax debts in figuring out the inheritance tax, to have a skilled lawyer at your side to find out if his or her situation provides similarities and when it is necessary to utilize judicial procedures.
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