Federal Fiscal Court, 11.12.2012, Ref.: IX R 14/12
If income from letting and leasing is calculated, the income-related expenses incurred in connection with this type of income must be deducted.
In the case of income from letting and leasing, income-related expenses are those expenses that are caused by the private ownership of a rented or leased property, in particular a property, insofar as they serve to generate, secure and maintain the rental and leasing income.
In the above-mentioned judgement of the Federal Fiscal Court, the Court clarified the principles under which expenses for residential properties that have been vacant for many years can be deducted as income-related expenses incurred in advance from income from letting and leasing.
Facts of the Case The subject of the proceedings were two residential properties in a house which the plaintiff (partially) occupied himself and which was ready for occupancy in 1983.
One flat on the first floor was rented out until August 1997; since then it has been vacant.
In order to rent out the flat, the plaintiff placed box number adverts in a national newspaper about four times a year, in which he offered the flat for rent furnished.
The plaintiff calculated the rent stated in the adverts from the current rent index.
According to the plaintiff, no "suitable tenants" have come forward to date.
Another room with a bathroom on the top floor of the house was never rented out.
According to the plaintiff, there was no (longer) any intention to let the room; in previous years, however, he had occasionally (unsuccessfully) put up notices in the neighbourhood offering the room for rent.
Due to the vacancy, the plaintiff claimed surplus income-related expenses from letting and leasing in his income tax returns, which neither the tax office nor the tax court took into account, referring to the plaintiff's lack of intention to let.
Federal Fiscal Court: The BFH also dismissed the plaintiff's appeal as unfounded, thereby agreeing with the opinion of the tax office and the tax court.
The BFH assumed that the plaintiff had not made any serious and sustained efforts to let the property.
It is true that the taxpayer is free to determine the appropriate way of placing a rental property offered by him on the housing market and its valuation in individual cases.
However, the expenses incurred for the attic room could not be taken into account because the plaintiff had not wanted to let this property at all.
However, the costs incurred for the flat on the first floor could not have been deducted either.
The newspaper advertisements placed were clearly not successful; therefore, the plaintiff should have adapted his behaviour and looked for more suitable marketing channels as well as intensified his letting efforts.
In addition, it was reasonable to expect the plaintiff to make concessions (for example with regard to the amount of rent or with regard to the persons acceptable to him as a tenant).
As the plaintiff had not done so, it could be assumed that he had given up the decision to generate income.
The reasons for this also provide indications as to how other vacancy situations - for example in the case of regular letting activities of the taxpayer that are temporarily unsuccessful or only restrained for other reasons - are to be assessed.
The Senate also comments on the question of how to deal with long-term vacancies in areas with a structural oversupply of properties.
This is because the long-term vacancy of flats is a general problem on which a number of proceedings are still pending at the BFH (see, for example, case number IX R 68/10: Reaction to "rental requests" as a serious endeavour to let? IX R 39-41/11: No evidence of the type, scope and intensity of letting efforts during the vacancy period; IX R 9/12: "Selective letting efforts" with simultaneous intention to sell; IX R 19/11: Vacancy in the case of subletting; IX R 7/10: Vacancy in the case of interim letting).
Source Federal Fiscal Court
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