Advantages of an open contribution in kind to a partnership with the participation of a corporation? – An Income Tax Advantage Analysis of Section 6 (5) Sentence 5 of the EStG
Abstract
The open contribution of a single asset with hidden reserves from the business assets of a natural person to a partnership sanctioned by Sec. 6 (5) Sentence 5 EStG. reserves from the business assets of a natural person into a partnership with the participation of a with the participation of a corporation can, in certain constellations, lead to an advantageous from an income tax point of view compared to the direct sale of the asset the individual participates in the change in the value of the investment in the corporation resulting from the transfer. in the value of the shareholding in the corporation resulting from the transfer. However, the income tax advantage of the tax advantageousness of the contribution structure is mainly due to trade tax effects and not to the the shifting of the taxation of hidden reserves to the corporate tax sphere and the partial income tax procedure. In addition, the advantageousness of the of the contribution structure is influenced by the accounting alternative chosen and the asset allocation at the partnership. The accounting alternative of the carrying amount approach in the tax balance sheet of the partnership and a proportionate positive supplementary balance sheet for the co-entrepreneurial corporation leads to a double recognition of the hidden reserves for income tax purposes. of the hidden reserves and is therefore not considered adequate from a tax system perspective. adequate from a tax system perspective. The analysis shows that the provision of Sec. 6 (5) Sentence 5 EStG, with regard to the the objective of preventing an improvement in the income tax status of the contributor. stringent.