Initial value

Initial Value - In real estate appraisal, the initial value is the value of a parcel of land or a building at a specific starting point in time-such as the date of purchase, the commencement of a leasehold interest, or the date of a valuation for tax purposes. It serves as a reference point for measuring changes in value over time.

Areas of Application

In leasehold rights, the initial value of the property is determined at the time the contract is signed and serves as the basis for calculating the ground rent and any adjustment clauses. The initial value is typically determined by a market value appraisal and documented in the leasehold agreement. For long-term leaseholds of 50 to 99 years, the initial value is particularly important, as adjustment clauses use it as the starting point for value preservation calculations-for example, by adjusting the ground rent every ten years based on the price development of the initial value.

In tax valuation-particularly for inheritance and gift tax-the initial value plays a role in determining capital gains that are subject to taxation. The initial value (acquisition cost plus incidental expenses and construction costs) also serves as the basis for determining the taxable capital gain when calculating capital gains tax (private sale transaction under Section 23 of the German Income Tax Act).

Significance for Capital Gains Tax

The initial value, as the basis for acquisition costs, is tax-relevant for every real estate sale within the ten-year capital gains tax period. The tax on the capital gain is calculated as:

Proceeds from sale - initial value (including incidental costs) - expenses incurred in the sale = taxable gain

The more precisely and comprehensively the initial value is documented-through the notarized purchase agreement, receipts for incidental costs, and evidence of value-enhancing investments-the lower the taxable profit will generally be. We therefore recommend permanently retaining all receipts related to the acquisition and subsequent construction costs.

Initial Value in the Case of Gifts and Inheritance

In the case of a gift or inheritance without consideration, the initial value used for the subsequent capital gains tax calculation is the amount originally paid by the donor or decedent-not the gift value. This is a frequently overlooked tax trap: Anyone who receives a property as a gift and sells it within ten years of the donor’s original purchase pays tax on the profit based on the donor’s original value at that time.

Capital Gains Tax Calculation Using Initial Value - Example

Nuremberg-Maxfeld, Condo, purchased in 2017, sold in 2025:

Parameter	Value
Purchase price 2017	€190,000
Incidental purchase costs (notary, real estate transfer tax, real estate agent)	€22,800
Renovations after purchase	€15,000
Total initial value	€227,800
Proceeds from sale in 2025	€340,000
Additional selling costs (broker, notary)	−€14,000
Net proceeds from sale	€326,000
Capital gain	€98,200
Tax liability at a 42% marginal tax rate	approx. €41,244

If the initial value were not fully documented (missing receipts for renovations), the taxable profit would rise to €113,200 - an additional tax liability of approx. €6,300.

Initial Value and Market Value Appraisal

A professionally determined initial value through a market value appraisal in accordance with ImmoWertV offers several advantages. It serves as a reliable document for the tax office, as a starting point for ground rent adjustments, and as evidence in the event of a dispute. Three methods are available for real estate valuation:

• Comparable sales method: Suitable for condominiums and single-family homes in easily comparable locations
• Income approach: Suitable for rental properties, multi-family homes, and commercial real estate
• Cost approach: Suitable for specialty properties without sufficient comparable transactions

Practical tip for Nuremberg and the metropolitan region

We recommend having the initial value of a property documented by an independent appraisal upon purchase or upon signing a leasehold agreement. This creates a solid basis for future value adjustments and avoids disputes regarding ground rent adjustments or tax assessments. In the Nuremberg metropolitan area, where property values have risen sharply in recent years, the correct documentation of the initial value has significant tax implications-a higher initial value directly results in a lower taxable profit upon subsequent sale.

Publicly appointed and sworn real estate appraisal experts in Nuremberg and Erlangen can be found through the Nuremberg Chamber of Commerce and Industry for Middle Franconia. Their appraisals are recognized by tax offices and courts as a reliable basis for valuation.

Frequently Asked Questions

How is the initial value determined?

The initial value is determined through a market value appraisal in accordance with the provisions of the Real Estate Valuation Ordinance (ImmoWertV). Depending on the type of property, the comparable sales, income, or cost approaches are used. In simple transactions where a market-based purchase price was paid, the purchase price itself can be used as the initial value-provided that the sale took place between unrelated third parties without any special circumstances.

Can the initial value be changed retroactively?

No, the initial value refers to a specific reference date and cannot be changed objectively. However, it can be reviewed through a new appraisal or an expert assessment if there are concrete indications that the original valuation was incorrect. An appeal may be filed against a tax assessment notice from the tax office that incorrectly sets the initial value.

What role does the initial value play in capital gains tax?

When selling real estate within the ten-year capital gains tax period, the capital gain is calculated as the difference between the sale price and the acquisition costs (initial value plus all incidental acquisition costs). In addition, deductions are made for value-enhancing construction work carried out after the acquisition. The higher the documented initial value and the proven investments, the lower the taxable profit-which makes careful record-keeping a key factor in saving on taxes.

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