Purchase, rental and sale of real estate are classically attributable to private asset management. Income is covered by § 21 EStG, capital gains are tax-free after 10 years. Exceptions apply, however, if the border to the commercial real estate trade is exceeded. If the conditions developed by the Bundesfinanzhof are met, a commercial enterprise “Landstückshandel” is created. Property previously held in private assets is then tax-related.
1st principle: Commercial activity vs. Asset management
The Income Tax Act distinguishes in principle between the individual types of income, but does not distinguish between “asset management” on the one hand and “business enterprise” on the other. At the same time, the characteristics of a commercial activity result from § 15 (2) EStG:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.