In the case in question, a mother had transferred her assets to her two children through gifting (real estate, shares in a GmbH [German limited liability company], cash in the bank, securities and horses). In addition to that, together with the children, she had set up a GbR in which she had a 5% stake and the children each had a 47.5% stake. According to the partnership agreement, the profits were shared out on a deviating basis, namely, the mother’s share of the profits was 90% and the children each got 5%. When the managing director position of the mother came to an end the children were supposed to be entitled to the share of the profits that corresponded to their share of the assets. The deviating profit distribution was regarded as a right to use that was similar to a usufructuary right. Following the death of the mother, the local tax office (Finanzamt, FA) determined her share of the business assets. When valuing the testator’s share, the local tax office took the deviating profit distribution formula in the partnership agreement into account. Therefore, in the view of the FA, after deducting the capital accounts, 90% of the residual value of the business assets were attributable to the testator’s share and not 5%.
The tax court, in its ruling of 15.4.2021 (case reference: 3 K 3911/18 F) considered the action challenging this to be well founded. Under the law, the value of the share of the business assets has to be separately assessed if this value is of significance for inheritance tax. This was the case due to the death of the mother. When calculating the fair market value of the share of the business assets, first of all, the capital accounts from the aggregated financial accounts have to be included; the remaining amount has to be divided up on the basis of the profit distribution formula. In the case in question, when valuing the share of the GbR that had been held by the testator and after deducting the respective capital accounts, the only point of disagreement between the parties related to the profit distribution formula that should be applicable for dividing up the residual joint assets. However, the deviating profit distribution ceased to apply upon the death of the testator. It was the testator’s personal right to have the profits distributed in this way and it was not possible to pass this on to her children.