When is a busi\u00adness dee\u00admed to have been wound up for tax pur\u00adpo\u00adses? This ques\u00adti\u00adon has signi\u00adfi\u00adcant impli\u00adca\u00adti\u00adons, as it is only at the time of win\u00adding up that a so-cal\u00adled \u2018wind-up gain\u2019 ari\u00adses, which is sub\u00adject to tax. The Nurem\u00adberg Finan\u00adce Court has dealt with a com\u00adplex inhe\u00adri\u00adtance case and cla\u00adri\u00adfied that, as long as the essen\u00adti\u00adal assets of the busi\u00adness have not yet been sold, the busi\u00adness is regard\u00aded as dor\u00admant, not as having been wound up.<\/p>\n
During his life\u00adtime, a father had run an acti\u00adve busi\u00adness, which included, among\u00adst other things, two pro\u00adper\u00adties. When he died, the busi\u00adness had alre\u00ada\u00addy cea\u00adsed tra\u00adding. The mother was appoin\u00adted as the preli\u00admi\u00adna\u00adry heir, and their child\u00adren as the sub\u00adse\u00adquent heirs. In 1988, the mother set up a GmbH & Co. KG and trans\u00adfer\u00adred her sole trader busi\u00adness, tog\u00ade\u00adther with the pro\u00adper\u00adties, into this company.<\/p>\n
Fol\u00adlo\u00adwing their mother\u2019s death, a dis\u00adpu\u00adte over the inhe\u00adri\u00adtance raged bet\u00adween the siblings for years. Under their mother\u2019s will, the son was bequea\u00adthed all the shares in the GmbH and, con\u00adse\u00adquent\u00adly, sole manage\u00adment of the com\u00adpa\u00adny. As both daugh\u00adters took legal action against this, the son ulti\u00adm\u00adate\u00adly beca\u00adme the sole heir, whilst the daugh\u00adters were award\u00aded only their sta\u00adtu\u00adto\u00adry share of the estate. In the cour\u00adse of the legal pro\u00adcee\u00addings, it also emer\u00adged that the limi\u00adt\u00aded lia\u00adbi\u00adli\u00adty com\u00adpa\u00adny (GmbH) had been incor\u00adpo\u00adra\u00adted inva\u00adlid\u00adly, which led to the limi\u00adt\u00aded part\u00adner\u00adship (KG) being wound up.<\/p>\n
The plots of land were final\u00adly sold in 2016. The trans\u00adfer of rights and obli\u00adga\u00adti\u00adons took place in 2017. In their tax returns for that year, the par\u00adties invol\u00adved declared inco\u00adme from let\u00adting and lea\u00adsing, but no capi\u00adtal gain on dis\u00adpo\u00adsal. The tax office took a dif\u00adfe\u00adrent view and asses\u00adsed inco\u00adme from busi\u00adness ope\u00adra\u00adti\u00adons as well as a capi\u00adtal gain on disposal.<\/p>\n
The legal action brought by one of the daugh\u00adters was unsuc\u00adcessful. The court made it clear that the pro\u00adper\u00adties had been valid\u00adly con\u00adtri\u00adbu\u00adted to the limi\u00adt\u00aded part\u00adner\u00adship becau\u00adse all the sub\u00adse\u00adquent heirs had con\u00adsen\u00adted to the con\u00adtri\u00adbu\u00adti\u00adon. As evi\u00addence of this, the court cited, among\u00adst other things, the limi\u00adt\u00aded partnership\u2019s decla\u00adra\u00adti\u00adon of assess\u00adment for the year 2011, which had been signed by all the sub\u00adse\u00adquent heirs.<\/p>\n
The decisi\u00adve fac\u00adtor for the court was that at no point had it been made appa\u00adrent to the out\u00adside world that the busi\u00adness was to be wound up. Accor\u00adding to estab\u00adlished case law, the ces\u00adsa\u00adti\u00adon of busi\u00adness requi\u00adres an expli\u00adcit decla\u00adra\u00adti\u00adon of intent that is appa\u00adrent to out\u00adsi\u00adders. This was not the case here. The con\u00addi\u00adti\u00adons for a dor\u00admant busi\u00adness had been met throug\u00adhout all tho\u00adse years.<\/p>\n
It was only with the trans\u00adfer of bene\u00adfits and lia\u00adbi\u00adli\u00adties to the purcha\u00adser in 2017 that the sus\u00adpen\u00adsi\u00adon of ope\u00adra\u00adti\u00adons came to an end. From that point onwards, the\u00adre were no lon\u00adger any sub\u00adstan\u00adti\u00adal ope\u00adra\u00adtio\u00adnal foun\u00adda\u00adti\u00adons. The capi\u00adtal gain on dis\u00adpo\u00adsal was the\u00adr\u00ade\u00adfo\u00adre to be cal\u00adcu\u00adla\u00adted for the year 2017.<\/p>\n
The jud\u00adge\u00adment high\u00adlights the far-rea\u00adching tax con\u00adse\u00adquen\u00adces that can ari\u00adse when inhe\u00adri\u00adtance dis\u00adpu\u00adtes remain unre\u00adsol\u00adved for years and assets remain within the busi\u00adness assets for tax pur\u00adpo\u00adses. Anyo\u00adne dra\u00adwing up a will that includes pro\u00advi\u00adsi\u00adons for rever\u00adsio\u00adna\u00adry heirs and sub\u00adse\u00adquent heirs, whe\u00adre busi\u00adness assets are invol\u00adved, should inform all par\u00adties con\u00adcer\u00adned at an ear\u00adly stage of the future tax implications.<\/p>\n
The jud\u00adge\u00adment is final; no appeal has been lodged. In indi\u00advi\u00addu\u00adal cases, it is advi\u00adsa\u00adble to seek tax advice in order to avo\u00adid simi\u00adlar surprises.<\/p>\n
Nurem\u00adberg Regio\u00adnal Court, jud\u00adge\u00adment of 10 April 2025, Case No. 4 K 1176\/23<\/strong><\/p>\n