In the last article, we disclosed the answers of the popular questions about the tax related to divorce, the distribution of property and the related tax. This time, as the second part, we would like to share more information regarding “the tax related to donation of residential assets and tax before getting divorce” and “taxation on the dispenser of real property”

Contents

1. The tax related to donation of residential assets and tax before getting divorce

2. Taxation on the dispenser of real property

3. Summery

1. The tax related to donation of residential assets and tax before getting divorce

It is possible for those who donate the residential assets to the spouse to receive the spouse deduction. Therefore, it may not be necessary to be imposed both the donation tax and the transfer income tax if the donation of residential assets and declaration of donation tax are done before getting divorce. Please note this spouse deduction policy only applies to the case of residential assets donation between a couple with over 20 years marriage period.

The content is that it is approved to deduct the spouse deduction amount of 21,100,000 yen, including the basic deduction for calendar tax of 1,100,000 yen, from the assessment value. The assessment value is subject to change depending on the evaluation criteria of inheritance tax, on the other hand, the land depends on the street value, and the building depends on the assessed value of fixed assets.

Please be aware that if a donation on the premise of divorce is done right before getting divorce, it is possible to be denied applying to the spouse deduction due to being substantially regarded as a divorce benefit. The one who receives the divorce benefit will not be imposed the income tax, nor the donation tax unless it is excessively expensive. However, the real estate acquisition tax will be imposed on those who acquire a real estate, the registration and license tax will be imposed on those who register transfer of its ownership. Both the real estate acquisition tax and the registration and license tax will be imposed regardless of the reason for acquiring the real estate.

2. Taxation on the dispenser of real property

(1) As transferring the ownership of real estates (land or building) as distribution of property caused by divorce, the dispenser will be subject to transfer income tax. As stipulated clearly in Fundamental directives of income tax 33-1 No.4: “When there is a transfer of assets as distribution of property, the person who settled the assets will be regarded as transferring the assets with the market price at the time of distribution.” The distribution of property is subject to transfer income tax.

(2) Regarding the calculation of transfer income tax, it is the amount after deducting the total of acquisition fee and transfer fee of the real estate from the market price as distribution (transfer price). There will be no taxation if the market price at the time of distribution is less than the time of purchasing the real estate. Even if the market price at the time of distribution is higher than the time of purchasing, there is still a possibility of applying to the special deduction up to 30,000,000 yen (Article 35-1 of the Act on Special Measures concerning Taxation) from the transfer income tax if it is distributed before December 31th of the year when 3 years have passed since moving out from the land and buildings belong to dispenser.

(3) However, this special deduction does not apply to the case of transferring to the “spouse or others who have a special relationship individually with the person who settles the assets”. It is recommendable to distribute the assets in the first 2 years (Article 768-2 of the Civil Code) since finalizing divorce and becoming non-spouse. Therefore, to be subject to this special deduction, it is necessary to state the contents: “I will transfer this real estate caused by divorce as the distribution of property on condition of finalizing divorce.” on the notarized document for the case of collaborative divorce, or on the record of conciliation for the case of arbitrated divorce.

3. Summery

Last time and this time, we have disclosed the tax policies related to divorce in Japan. The divorce related taxations are subject to change depending on the appraised value of real estates and other various circumstances. Since the laws regarding divorce and tax are not familiar to everyone, we recommend you to consult with the experts first if it is needed.

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