Skip to main content
Practical Income Manual 2022.

Chart: Adjudication excesses in the extinction of the condominium. TEAC Resolution of June 7, 2018

The following table includes the criteria established in the Resolution of the TEAC of June 7, 2018, Claim number 00/02488/2017, relapsed into an extraordinary appeal for unification of criteria.

Adjudication excesses in the extinction of the condominium. Resolution of TEAC of June 7, 2018

Awards

Value of the property on the date of termination of the condominium

Taxation

The awards correspond to the ownership quota of each community member.

Equal to the value of the property when the condominium was established

There is no property alteration for any of the community members and, therefore, there is no capital gain or loss. Article 33.2 Personal Income Tax Law.

Greater than the value of the property when the condominium was established

Since the property is indivisible or greatly detracts from the division, it is awarded in its entirety to one of the community members with the obligation to compensate the remaining members in cash.

Equal to the value of the property when the condominium was established

Community member to whom the property is awarded in its entirety and compensates the others in cash: Taxed under the documented legal acts modality of ITPAJD for the part that is acquired ex novo by virtue of such operation (criterion established in TS Judgment 1,484/2018, of October 9).

Rest of the community members who transmit their undivided participation quotas in exchange for price: Given that the value of the property has not increased in value no capital gain or loss would be generated for them for consideration.

Greater than the value of the property when the condominium was established

Community member to whom the property is awarded in its entirety and compensates the others in cash: Taxed only under the documented legal acts modality of the ITPAJD for the part that is acquired ex novo by virtue of such operation (criterion established in the TS Sentence 1,484/2018, of October 9).

Rest of the community members who transmit their undivided participation quotas in exchange for price: A capital gain for consideration would be generated for them .

It is divided among the community members without respecting the share of ownership of each one and without compensating these differences in cash.

Equal to the value of the property when the condominium was established

Community member(s) who receives a portion of the property greater than what would correspond to their participation fee: There is an excess of allocation when acquiring free of charge the part of the undivided quota corresponding to that surplus and is taxed in ISD for said over-allotment.

Community member(s) who receive a lower portion of the property than would correspond to their participation fee: They would be transmitting to the former free of charge the part of the undivided quota corresponding to that deficit, producing an alteration in the composition of their assets but given that the value of the property has not increased no gain or loss would be generated for them property for profit .

Greater than the value of the property when the condominium was established

Community member(s) who receives a portion of the property greater than what would correspond to their participation fee. There is excess allocation when acquiring free of charge the part of the undivided quota corresponding to that surplus and is taxed in ISD for said excess allocation

Community member(s) who receive a lower portion of the property than would correspond to their participation fee: They would be transmitting to the former free of charge the part of the undivided quota corresponding to that deficit, producing an alteration in the composition of their assets and given that the value of the property has increased a capital gain would be generated for them as lucrative.

It is divided among the community members without respecting the share of ownership of each one, but compensating these differences in cash.

Equal to the value of the property when the condominium was established

Community member(s) who receives a portion of the property greater than what would correspond to their participation fee. There is an excess of allocation when the part of the undivided quota corresponding to that surplus is acquired for consideration and is taxed in ITP for the excess of allocation

Community member(s) who receive a lower portion of the property than would correspond to their participation fee and cash compensation for the rest. They would be transmitting to the former for consideration the part of the undivided quota corresponding to that deficit, producing an alteration in the composition of their assets but given that the value of the property has not experienced an increase no gain or loss would be generated for them property for consideration.

Greater than the value of the property when the condominium was established

Community member(s) who receives a portion of the property greater than what would correspond to their participation fee. There is an excess of allocation when the part of the undivided quota corresponding to that surplus is acquired for consideration and is taxed in ITP for the excess of allocation

Community member(s) who receive a lower portion of the property than would correspond to their participation fee and cash compensation for the rest.  They would be transmitting to the former for consideration the part of the undivided quota corresponding to that deficit, producing an alteration in the composition of their assets and given that the value of the property has increased, a capital gain would be generated for them onerous .

Note: The different situations and legal criteria established by the TEAC in this resolution of June 7, 2018 refer to the extinction of the condominium over a single real estate

However, the resolution of the TEAC of June 7, 2018 indicates that in many cases co-ownership falls on several properties. Although the diversity of situations can be overwhelming, some relevant criteria can be pointed out, which we transcribe below:

  • Previously, the existence of one or more communities of property must be determined in each case. In this sense, and in view of the very frequent situations in practice, it must be taken into account that, although two or more properties are owned by two or more owners, this does not automatically determine the existence of a single community of property, but rather that there may be one or more communities depending on the origin of the aforementioned community. This is what happens when the common assets come, some from a hereditary acquisition and others from having been acquired by acts inter vivos, or when, even though all the assets have been acquired by inheritance, they come from different inheritances. In such cases it must be understood that two communities come together, one of inter vivos origin and the other of mortis causa origin, or both of mortis causa origin, without the above being in any way hindered by the fact that the owners of the two communities are the same people. In the event that there are two or more condominiums, their dissolution will imply the existence of two or more different legal transactions that, as such, must be treated.

  •  In the event that there are two or more real estate properties in the community of property, it is necessary to consider the set of assets that make up the same in order to determine whether the subsequent award to each of the community members corresponds or not to the respective share of ownership, so that there may be no alteration in the composition of their respective assets. Only in the event that assets or rights with a greater value than that corresponding to their share of ownership were attributed to one of the community members, would there be a capital alteration in the other, generating, in the latter, a capital gain or loss. In accordance with the above, there would be no patrimonial alteration due to the dissolution of the condominium over the various properties as long as the award values correspond to their respective market value and that the awards made correspond to the respective ownership quota, preserving the awarded assets, the original values and dates of acquisition.