The tax exemption for a family home which was acquired by way of death by the surviving spouse (§ 13 para. 1 no. 4b Inheritance and Gift Tax Act [IGTA]) ceases to apply retroactively if it was transferred to a another person in the meantime and in this context the transferor (surviving spouse) was granted a usufruct or right of abode (see also Munster Finance Court September 28, 2016 (3 K 3757/15); Hessian Finance Court February 15, 2016 (1 K 2275/15)).
The acquisition of a family home by way of death by the surviving spouse is tax exempt pursuant to § 13 para. 1 no. 4b IGTA if he uses it for personal occupation for at least ten years. Otherwise, the tax exemption ceases to apply retroactively in full.
For more details regarding the tax exemption for family homes see Koeniger, The German Inheritance and Gift Tax, 2017, p. 171 et seqq.