When the Statute of Limitations for Gift Taxation Starts

This judgment of the BFH from 06.06.2007 (re II R 54/05) is about the case, where the tax office is arguing that the statute of limitations (four years) for their demand to file a gift tax return and pay gift tax started from the after servicing a tax assessment.


Smarty bought from her father 9,299 shares of a joint-stock corporation for DM 55 per share in 1989. In 1991, she sold these shares to company of which her father was a managing director at the price of DM 250 per share. Smarty did not file a gift tax return. After an audit in 1995 in daddy’s company, Smarty’s tax office found out about this deal. In 2001, the tax office assessed using an estimated value of this purchase as a taxable gift.

The tax office demanded that she files a gift tax return for receiving a bunch of shares for an extreme low price compared to the later price for selling these shares to another person. Smarty disagreed because the four-year period before the tax claim has elapsed (§170 V no. 2 AO). The office argued that this is true, however, the period started only upon having knowledge of their claim, i.e. of the received gift. Since Smarty did not submit a tax return, the law of §170 II AO would give the tax another four years.

The court decided for Smarty. The tax claim is barred. The statute of limitations in this situation means that the tax office cannot demand to be paid or change an assessed tax anymore (§169 I 1 AO). The tax office had misinterpreted the law. Generally, the assessment period starts after four year ends in which the grounds for taxation have been set – when it comes to gifts taxes (§170 I AO). §170 V AO brings an exception for gifts tax in so far that the taxation period can either start according to the general rule or when the tax office finds out about these grounds.

The Bundesfinanzhof ruled that the tax office misinterpreted the law. §170 V no. 2 AO does let the assessment period start anew. This gift of the shares was executed when Smarty sold the shares to daddy’s company in 1991. Since the tax office found out of the gift in 1995, the four-year period to assess Smarty for taxation ended in 2000. The tax office however, serviced an assessment in 2001 – one year too late. Therefore, this assessment has become time-barred. The exception for gifts tax does not mean that the assessment period restarts – as the tax office had assumed.

Published on the old CMS: 2008/4/30
Read on the old CMS till November 2008: 2,673 reads

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