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Tax Deductibility of Valuation Reports in Divorce Proceedings - Tax Law

When assessing the value of a property because of the duty to disclose information and pay gains in divorce proceedings, the costs incurred are not tax deductible.


Cologne, NRW -- (SBWIRE) -- 10/15/2013 -- GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Bremen, Dusseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Nuremberg, Stuttgart and London conclude: The Finance Court of Hessen (FG) ruled in its judgment of July 2, 2013 that the costs for one such valuation report cannot be deducted as an extraordinary burden in accordance with sec. 33 of the German Income Tax Act (EStG), as this did not meet the necessary requirement of inevitability (Az. 13 K 985/12).

In the present case, the claimant’s former wife demanded information regarding his final net worth by presentation of an inventory and other necessary documents for the assessment of value, whereupon the claimant tasked a surveyor with producing the valuation report in question. He then produced the valuation report for a fee, which the tax office refused to recognise for tax purposes after the claimant had submitted a tax declaration.

The claimant had referred to the valuation report as an extraordinary burden and went on to state that he had to expend these costs for legal reasons, since his wife had demanded such a valuation report with her action for disclosure.

The Finance Court of Hessen did not follow this. It dismissed the claim on the grounds that the claimant had not been obliged to produce the report in question. The former wife’s demand for information was directed merely at the presentation of documents, not at the production of a report for a fee. In the opinion of the Hessen FG, this also corresponds to the legal position in civil law, according to which a right to information exists only with respect to the balance of the final assets. The claim in excess of this for appraisal of value was only aimed at assessment by the obligated party itself or its supporting staff.

There is no right to appraisal of value carried out by an official expert. In particular, the former wife had deemed the commissioning of an official expert merely to be sensible, not, however, as necessary. The Court stressed that the claimant had commissioned the official expert at his own responsibility and therefore had no right to be reimbursed for the costs. This was correctly picked up on by the family court in the proceedings for assessing costs.

Tax law is a complex area, especially with regard to possible problems in divorce proceedings. A lawyer active in the field of tax law can help answer legal questions.

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GRP Rainer LLP is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Essen, Frankfurt, Hamburg, Hannover, Munich, Stuttgart, Bremen, Nuremberg and London UK.

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