The depreciation of real estate which was transferred by gift inter vivos after the point in time when the tax becomes chargeable cannot justify a tax waiver due to reasons of equity. According to the decision of the Federal Finance Court the point in time when the Inheritance and Gift Tax becomes chargeable is decisive for valuation purposes. Therefore, no dynamic element is to be taken into consideration. Events after the valuation date / chargeability of tax do not have a retroactive effect. It is the clear order of the legislator that later changes in value remain unconsidered.
Nevertheless, a tax waiver due to reasons of equity may be applicable in certain cases, e.g. if the annual taxation of pensions, uses or services (§ 23 Inheritance and Gift Tax Act) was applied for and the person liable to pay has become insolvent. This is justified by the fact that in these cases the person entitled to a pension, use or service still has to pay the annual without any consideration (see Federal Finance Court (II R 4/14) – October 22, 2014). In contrast, the transferee can sell the real estate at any time for consideration to minimize his loss.
Consequently, the later bankruptcy of a company and the resulting supplementary taxes according to § 13a para. 6 Inheritance and Gift Tax Act (IGTA) or substantially falling stock values or exchange rate fluctuations after the valuation date do(es) not lead to an inequity.
For more details see Koeniger, The German Inheritance and Gift Tax, 2017, p. 302 et seqq.