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No anticipated income-related expenses of the usufructuary for a plot of land

Income-related expenses – if no income has yet been generated

In principle, expenses can already be deducted as income-related expenses when no income has yet been generated. However, a prerequisite for recognition as anticipated income-related expenses is a sufficient factual and temporal connection with the subsequent income.


Deduct real estate as income-related expenses?

In this context, the question arises whether, in the case of a transfer of real estate, e.g. to children under usufruct reservation, the children can deduct expenses for the real estate as income-related expenses, although the income continues to accrue to the previous owner (and current usufructuary), e.g. the parents. The Federal Fiscal Court has generally answered this question in the negative for maintenance expenses, because in the case of a life-long usufruct, the end of use by the usufructuary is not foreseeable.

The court has now confirmed its view and extended it to other expenses. In the case in question, one co-owner of a property encumbered with usufruct had acquired the share of the other co-owner against payment and financed the purchase price; the interest on the debt could not be taken into account as anticipated income-related expenses.

Expenses can only be deducted if the end of the usufruct is foreseeable and the owner recognizably incurs expenses with a view to the imminent use of the property to generate his own income.