Transfer of a Section 6b reserve and effects on the capital account

Whether and to what extent losses of limited partners are eligible for compensation or can only be offset depends on the respective capital account within the meaning of Section 15a (1) sentence 1 of the German Income Tax Act (EStG). However, there is no legal definition. According to established case law, in addition to the overall balance sheet, the respective supplementary balance sheet must also be taken into account, in which the additional or reduced expenses of shareholders compared to the expenses reported in the overall balance sheet are shown. In its ruling of December 12, 2024 (case no. IV R 24/22), the German Federal Fiscal Court (BFH) decided that a negative supplementary balance sheet resulting from the exercise of the option under Section 6b EStG must also be taken into account in the case of a transfer of the reserve formed across legal entities.

In the case decided, a civil law partnership (GbR) made a profit from the sale of a property in 1997. It formed a reserve for this in its overall balance sheet in accordance with Section 6b (3) EStG. A partner in the GbR was also the sole limited partner in a GmbH & Co. KG. The GbR's joint assets included a plot of land that had been developed since 2001. In 2001/2002, the GbR transferred the capital gain generated in 1997 and neutralized with the reserve formed in accordance with Section 6b EStG pro rata to the acquisition and production costs of the developed property. This led to corresponding reductions in the balance sheet values of the GmbH & Co. KG to corresponding reductions in the balance sheet values for the land and the building constructed on it. The offsetting entries were recognized by GmbH & Co. KG recorded the offsetting entries in the “Capital account IV reserve 6b EStG” (special account), which showed a negative balance as at December 31, 2002. In the year in dispute 2006, a current overall loss was determined, the share of which attributable to the limited partner was, in the opinion of the tax office, subject to the loss utilization restriction of Section 15a (1) sentence 1 EStG. This was because the transfer of the GbR's hidden reserves to the acquisition and production costs of the GmbH & Co. KG had led to a reduction in the relevant capital account. The BFH confirmed this.

According to the principles that supplementary balance sheets are also to be taken into account in the capital account within the meaning of Section 15a (1) sentence 1 EStG, not only contributions or withdrawals lead to a change in the relevant tax capital account, but also the additional or reduced expenses of shareholders recognized in the tax balance sheet. At the same time, the BFH confirmed that hidden reserves are not to be taken into account when calculating the (negative) capital account. This applies not only to hidden reserves formed in business assets and not disclosed, but also to hidden reserves disclosed and deducted again in accordance with Section 6b EStG. This is justified because the tax exemption of a capital gain resulting from the exercise of the option under Section 6b EStG must not have a double effect.

If the limited partner makes use of the option to transfer hidden reserves in accordance with Section 6b EStG across all legal entities, this affects the tax balance sheet of both the transferring and the reinvesting company. In the case of the transferring partnership, the hidden reserves are added to the capital account of the balance sheet to be prepared without affecting profit or loss; in the case of the reinvesting (acquiring) partnership, the acquisition or production costs of the reinvestment asset are reduced without affecting profit or loss and charged to the capital account. This reduction in the capital account corresponds to the transferred hidden reserves, the disclosure and taxation of which was prevented by the sale of the property, first by the formation of the reserve at the GbR and then by its transfer to the GmbH & Co. KG was prevented. The amount recorded in the special account in the case of the ruling serves as a supplementary balance sheet for the allocation of reduced capital or reduced acquisition costs in order to allocate the (re)disclosure of the hidden reserves transferred and deducted in the past to the limited partner in the event of the subsequent sale of the property. Therefore, these capital reductions must be taken into account as reduced acquisition costs when determining his capital account within the meaning of Section 15a (1) sentence 1 EStG.

If the limited partner's capital account became negative with the transfer of the reserve in accordance with Section 6b EStG, losses attributable to the limited partner lead to an increase in the negative balance and are therefore not eligible for compensation, but can only be offset.