The Superior Court of Justice (TSJ) of Madrid has clarified in a recent sentence how to know if, in the face of the payment of the municipal capital gain, there has been a gain or not in case of receiving a home in inheritance in stages, that is, in two different moments of the taxpayer.

This is a very common assumption: in an inheritance it is common for the heirs to acquire 50% of a home upon the death of one of the parents and the rest when the other dies.

In the case brought before the Madrid TSJ, it was a property acquired at 50% in 1981. Years later, in 2012, the taxpayer acquired the remaining 50%. Finally, he transferred the property in 2014.

Now the Madrid TSJ clarifies how to know if there has been an increase in the value of the property in order to pay the municipal capital gains tax. Go ahead that the main way to avoid paying the municipal capital gains tax when selling a property is to show that there has been no gain from the sale, that is, from the comparison of the deeds of acquisition and transmission of the house, there is a lost.

Specifically, the Madrid TSJ considers that “the appellant had to prove the value of the property in 1981 and divide it by two (or, for example, provide the public deed with the acquisition value for the appellant of said 50%), and the value of the property in 2012 and dividing it by two (or the public deed with the acquisition value for the appellant of said 50%), and by adding the two amounts, is how you could obtain the real figure of the property that was of cost for the appellant its acquisition. And said value would be the term of comparison with the value of the property in 2014, date of transmission. “

In summary, the acquisition value is the sum of the amounts deeded on each date, but prorated on the part of the property acquired on each date.

For the TSJ of Madrid, the way to prove the loss in the sale of a home inherited in stages and thus avoid the payment of the municipal capital gain, is “proving how much the purchaser has cost the total property with the sum of the amounts paid over time in the various acquisitions, and compare it with the value obtained in the total transfer of the property. The appellant having not proven these terms of comparison, it must be concluded that the appealed judgment should be revoked and the contentious-administrative appeal filed should be dismissed. “

In addition, the Madrid TSJ recalls that “there is only one taxable event that accrues at the time of transfer (in the case resolved at the time of inheritance) and therefore only one settlement and one installment.” He emphasizes that the City Council does not issue two settlements. Therefore, it is not possible to determine the non-existence of an increase in value, separately, for each 50% of the asset acquired on different dates.

In short, we are facing an interesting sentence that “banishes the possibility of proving the non-existence of an increase in the value of the property inherited separately. And this, in the case of properties acquired on various dates (acquired “in stages”, according to the TSJ) “.

Although it is a criterion that does not bind the Treasury, or other Superior Courts of Justice, it must be taken into account by taxpayers when determining whether there has been a loss in the sale of the inherited home and it is interesting to raise a battle for avoid paying the municipal capital gain.

What is capital gains and when is it paid?

It is a municipal tax that is levied on the increase in value of urban properties when a transfer occurs.

Currently, the purchase price is not taken into account, but the cadastral value of the property. The tax is calculated based on tables of coefficients that correct the amount that we must pay based on the time during which ownership of the property has been maintained for a maximum of 20 years.

This tax must be paid each time there is a transfer, either by sale or exchange. In general, the capital gain is paid by the person who transmits the property, except in the inheritance or donation that is paid by the person who receives it.