Property Valuation in the Context of Inheritance and Gifts: When is a Second Opinion Worthwhile?

In the case of inheritances and gifts of property, the tax office must determine a value for tax purposes. Unlike with bank deposits or listed securities, this value cannot simply be read off. Property is therefore valued in accordance with the provisions of the Valuation Act, based on market data. In its judgement of 11 March 2026 (Ref. II R 6/23), the Federal Fiscal Court clarified that taxpayers can only challenge the comparative values determined by expert committees in court to a limited extent. However, there is another way to reduce the tax burden.

The Valuation Act prescribes a fixed hierarchy of valuation methods for the purposes of property valuation for tax purposes. Taxpayers are not free to choose between the methods. For flat-ownership properties and many single-family and two-family houses, the comparative value method must, as a general rule, be applied first. For this purpose, the comparative prices or comparative factors determined by the valuation committees are used.

They are based on actual sale prices achieved for comparable properties and thus often reflect high market prices. The asset-based valuation method is only used when no suitable data is available. It focuses more on the land value and the cost of constructing the building, and often results in lower valuations. The various valuation methods can result in significantly different values for the property. The statutory order of priority can therefore have a considerable impact on the amount of inheritance or gift tax payable.

This is precisely what the case decided by the Federal Fiscal Court (BFH) demonstrates. The heirs considered the tax value of a flat to be significantly inflated and had calculated the property value using the asset value method at just 78,493 euros. However, as comparative data from the expert committee was available, the comparative value method had to be applied as a matter of priority. On the basis of 20 comparative prices, the Valuation Committee determined an average value of 186,000 euros. The difference thus amounted to more than 100,000 euros. The tax office and the tax court accepted the higher value. The Federal Fiscal Court (BFH) confirmed this and made it clear that an in-depth judicial review is only considered in cases of specifically identified or obviously recognisable errors.

Obvious errors may, for example, arise where the valuation committee has based its assessment on incorrect area or fitting and finishing details, has used comparator properties that are clearly not comparable, or where there are calculation or transcription errors in determining the comparative prices. By contrast, it is not sufficient merely to point out that a different valuation method would result in a lower value.

If a valuation report within the meaning of Section 198 of the Property Valuation Act (BewG) establishes a lower market value, this must form the basis for taxation. However, this is subject to the condition that the valuation report complies with the statutory requirements and provides comprehensible evidence of the lower value.

The judgement shows that the decisive outcome is often determined not in court, but at the valuation stage. Anyone who considers the assessed property value to be too high should have it checked at an early stage to see whether a lower market value can be demonstrated in accordance with Section 198 of the Valuation Act. It makes sense to check first whether the effort involved is worthwhile. To do this, the potential difference between the tax value and the market value that can actually be realised must be determined. The costs of a market value valuation must also be taken into account. A valuation is only worthwhile if the tax savings are significantly higher than the valuation costs. Such a review can be particularly useful for properties that have been valued on the basis of comparative values, as the tax values are sometimes significantly higher than the results of other valuation methods.