Estate processing

Kurt stopped by the office last week.

He couldn't understand why he had to pay tax on the profit he had made from selling the property he had inherited from his parents last year.

It looked easy otherwise. In the probate court he had been given 2 forms, an opening status and an estate inventory, quite logical and easy to fill out. As said, so done. Kurt filled out all the papers himself and arranged whatever other practical things were in connection with the privately transferred estate.

The property was valued by the government at 1,000,000 DKK, but Kurt knew from the daily press that in family circumstances the value had to be set 15% lower, so he set the value at 850,000 DKK, and saved 15% in estate tax of 150,000 DKK (22,500 DKK) – and that was also some kind of money.

The opening status and estate inventory were approved without any problems by SKAT and the probate court.

Kurt had no intention of moving to his childhood home, so he put the property up for sale with the local real estate agent, who estimated the sale price to be DKK 1,775,000, and after an astonishingly short time – and a small discount – the property was sold for DKK 1,750,000. The selling costs amounted to DKK 100,000, a profit of DKK 800,000 compared to the price Kurt had paid for the property to the estate.

If Kurt had occupied the property himself, the profit would have been tax-free. It is not required that the property has been occupied for a specific period of time. However, there must be actual occupation.

Kurt had a rude awakening when he later received his annual statement – he had to pay tax on his profits, a total of approximately DKK 430,000.

I could only tell Kurt that he should have let the estate sell the property. The profit of DKK 800,000 would not be taxed in the estate (the net assets were less than DKK 2,641,900 in 2014), but he would have to pay an estate tax of 15% (DKK 120,000), which was a saving of DKK 310,000.

It's just too bad! I can only encourage others to seek professional advice in similar situations, – and before one disposes.