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In a chain gift, for example, a grandparent first transfers a property to a child, who then gifts it on to a grandchild, in order to make use of additional tax allowances.
In such cases, the tax office examines closely whether the intermediary party was free to dispose of the property or whether an obligation to pass it on existed from the outset – in the latter case, the gift is attributed for tax purposes directly to the grandchild.
Careful timing and legal structuring, if in doubt with tax advice, is therefore essential to ensure that the desired tax savings are actually recognised.
If there is a legal or de facto obligation to pass on the property from the outset, for example through a corresponding agreement between the parties involved, the tax authorities often classify this as abuse of legal structuring under § 42 AO.
A greater time interval between the individual transfer steps as well as an actual, not merely formal, power of disposal on the part of the intermediary party speak in favour of tax recognition of the arrangement.