In this post we are going to talk briefly and concisely about the principle of partition equality and one of its exceptions. This exception is the taxation or taxation of excess allocation.

The principle of equality of the partition (art, 56 RITPyAJD)

The partition of inheritance supposes the adjudication to the heirs of the assets of the inheritance. The fiscal criterion is that the awards are in accordance with the hereditary title. That is, to the legatees and heirs to award their legacy or legitimate and nothing else. To the heirs adjudicate the inheritance according to the proportion in which they are heirs. 

Two possible ways to materialize the partition: get a tax woman

Partition can be materialized in many ways. Sometimes each and every property is awarded to the heirs equally. As many “pro undivided” communities are formed as there are assets in the inheritance. Other times singular assets are awarded to the heirs. In these cases, more or less homogeneous lots of goods are formed that are awarded. In these cases there are usually more or less important differences between the heirs. 

Treatment of excess allocation (art, 56.3 RIS and art, 11.1 RITPyAJD)

The fiscal singularity of the excess of allotment resides that when the assets are indivisible they can be awarded or one of the heirs with the condition that the excess is paid to the other herederos in cash. This is the meaning of article 1062 of the CC when it says: When a thing is indivisible or detracts a lot from its division, it may be awarded to one, in the capacity of paying the excess in money to the others.  For Catalonia see art, 468-8.

Fiscally, this excess is not taxed by the Inheritance Tax, but is taxed by the Property Transfer Tax. According to article 56. 3  Award excesses will be settled, according to the rules established in the Tax on Patrimonial Transmissions and Documented Legal Acts, when there are differences, according to the declared value, in the awards made to the heirs (…). This article refers us to art, 11 of the ITPyAJD Regulations which at point 1 considers Asset transfers for the purposes of the liquidation and payment of the tax to B) The declared excesses of adjudication, except those that arise from complying with the provisions of articles 821, 829, 1.056 (second) and 1.062 (first) of the Civil Code and Provisions of Foral Law, based on the same foundation. 

In sum, the declared excesses of allocation may be subject to the ITP but - and this is what is of interest here - they are not subject if the excess is caused by the allocation of an indivisible asset such as a property. The only tax requirement is that the successful bidder pays the excess to the other heirs in cash.

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