Israeli Court Rules Minors Receiving Gifted Apartments Are Ineligible for Tax Benefits
An Israeli court has ruled that minors who receive apartments as gifts from grandparents are not entitled to reduced purchase tax benefits typically granted for a single-family home. The case involved a grandfather who purchased separate apartments in Ramat Gan for each of his 12 minor grandchildren, intending to secure their financial future. The gift agreements established clear property separation between each grandchild and their parents, with rental income deposited into dedicated accounts under the minors' names and restrictions on parental use or sale until the grandchildren reach age 25 or receive court approval.
Each apartment cost approximately 3.5 million shekels, and the grandfather sought to pay a reduced purchase tax rate of about 75,000 shekels per apartment, applicable to a single home. However, the Israeli Tax Authority demanded full purchase tax payments totaling roughly 2.5 million shekels for all 12 apartments, treating them as additional properties rather than a single-family home. The tax authority's interpretation also affects future capital gains tax liabilities when the minors sell the apartments.
The district court acknowledged the case's complexity and precedent-setting nature. It examined the legal concept of "family unit presumption," which generally treats parents and children as a single buyer unless exceptions apply. Since the grandchildren live with their parents in the parents' home, the newly purchased apartments were deemed additional properties, not primary residences. The court recognized the grandfather's intent was not tax evasion but ruled that the apartments serve as investments rather than primary homes, thus disqualifying them from tax relief designed to support first-time homeownership.
The court noted that broad tax exemptions could harm public revenue and emphasized the social purpose behind the tax benefits. However, it also highlighted problematic distinctions in the law, such as differing treatment between minors and adults receiving gifted homes and inconsistencies between gifts and inheritances. The court urged the legislature to clarify these issues through explicit legislation and refrained from imposing legal costs on the grandfather.
This ruling sets an important precedent on how tax benefits apply to gifted real estate for minors and underscores the need for clearer statutory guidance.
