Taxation on Sale of Inherited Apartments

Tax Exemption – Home Inherited

Is a person who inherits an apartment entitled to tax exemptions if he/she sells it?

Yes, but only if three, cumulative conditions are met. Firstly, the person who inherited the property and wishes to sell it must be a spouse or child of the deceased, or the spouse of a the deceased's child. Secondly, before his death, the deceased owned only one apartment. Thirdly, if the deceased were alive and were selling the apartment, he would be entitled to a tax exemption.

Tax Exemption – Limited To One Apartment

Can a person who inherits more than one apartment from the deceased take advantage of tax exemptions regarding the sale of inherited property?

No ! The exemption on tax relates to the sale of one apartment only gained by way of inheritance and it cannot be exploited regarding additional property.

Tax Exemption – Independent of Heir's Own Property

Is there any connection between an heir's eligibility to enjoy tax exemptions on the sale of an inherited apartment and the number of properties already registered in his name?

No! There is no connection between the number of properties the heir himself owns and his eligibility for tax exemptions on an apartment he inherits should he wish to sell it.

Previous Exemptions Do Not Affect Current Eligibility

If , in the past, an heir has gained a tax exemption on a property he inherited and sold, could this prevent him from being eligible for this in the future?

No ! Past exemptions , in relation to another deceased person, do not affect eligibility in the future.

Tax Exemption on Inherited Property & Apartment Tax Exemptions

Will the use of a tax exemption in connection with an inherited property, be at the expense of that person's eligibility for other tax exemptions on the sale of an apartment?

No! Someone who sells an apartment will be eligible for tax exemptions if he meets the requirements of the Property Tax Law (Appreciation, Sale & Acquisition ) of 1963, without any connection with, and without affecting his exemption on an apartment gained by way of inheritance.

Division of Inherited Property & Payment Equalization – "Transaction"

Will the division of inherited property between heirs, which includes making equalization payments between them, be regarded as an ordinary sales transaction which is taxable, where the source of the funds for paying them is from outside the estate?
Yes ! The only inheritance transactions that do not involve tax are the direct transfer of property to the heirs or its division among the heirs, and the making of equalization payments between the heirs from within the estate itself – i.e. from estate property.

Sale of Estate Property By Executor

Is tax payable on the sale of property rights belonging to the deceased's estate if the executor of the estate sells the property to an outside, who is not one of the heirs?

Yes – by law this would be a "sale" which is taxable.

Sale of Property By Heir to Outsider

In principle is the sale of property rights in the estate by heirs, to a stranger, taxable by law?

Yes, according to the conditions of the tax laws, and any exemptions.

Applicability of Tax Exemptions

When do the tax exemptions regarding the sale of inherited property apply?

If the property concerned belonged to the deceased when the relevant property taxation laws of 1963 were published, or he acquired them later, and was sold by an heir after the publication.

No Exemption on Sale of Inherited Property By Parent

If a parent inherits property from his/her child, is he eligible for tax exemption if he/she sells it?

No! The exemption only applies if the person inheriting the property , and who sells it, is the deceased's spouse or child or spouse of the deceased's child.

Exemptions Re Property From Different Relatives

If a person inherits property from one relatives, and enjoys tax exemptions on its sales, will this prevent him from enjoying similar exemptions on other property inherited from a different relative?

No!

Cohabitee Entitled to Tax Exemptions

Do the tax exemptions on the sale of inherited property by spouses apply to common –law as well as lawfully married spouses?

Yes - although the relevant tax legislation does not define spouse, there is nothing to prevent a common-law spouse or cohabitee –– from enjoying the same exemptions as a married spouse.

Adopted Child Exempt From Taxation on Sale of Property

Is an adopted child entitled to the same tax exemptions as a biological child regarding property inherited from his adoptive parents?
Yes!

Step-Child Unentitled to Exemptions

Is an adopted child entitled to the same tax exemptions as a biological child regarding property inherited from his adoptive parents?

Yes!

Son or Daughter-in-Law & Tax Exemptions

Is a son or daughter-in-law entitled to tax exemptions regarding property inherited from his/her in-laws or one of them?
Yes!

Deceased's Property Ownership & Heir's Tax Exemption

Could an heir be ineligible for tax exemptions on the sale of property he inherited if the deceased owned more than one apartment when he died?
Yes – if the deceased owned more than one apartment when he died than the heir is not eligible for tax exemptions when he sells it.

Foreign Property Does Not Affect Eligibility

If the deceased owns one apartment in Israel, and one abroad, will the heir who inherits the Israeli property be entitled to tax exemption on its sale?
Yes ,as the foreign property is not counted as a property owned by the deceased at the time of death, only real estate in Israel.. This is , of course, providing the other conditions necessary for the exemption are met.

Real Estate Owned by Family Unit Excluded

When the tax authorities work out how many apartments the deceased owned when he died, in order to ascertain whether an heir is eligible for tax exemption on the sale of inherited property, will real estate owned by the "family unit" be counted?

In principle, no, as the law specifically mentions property owned by the deceased.

Deceased's Family's Exemptions After His Death

Can property tax exemptions that members of the deceased's family enjoyed after his death affect his eligibility at the time of his death, in so far as this affects the heir's eligibility to enjoy exemptions on the sale of property inherited from him?

In principle, no.

When Apartment Divided into Two Units

What happens to the potential tax exemptions when two heirs who inherit an apartment together demolish it and create two separate apartments?

The heirs are not entitled to get exemption for the two apartments together.

Tax Planning

Can an heir who misses out on tax exemptions on the sale of property he inherited from the deceased , wait a relevant period of time so that he is eligible for a different exemption if he sells it?

Yes – this is legitimate.

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