Israeli Court Rejects Tax Benefit Appeal for Apartments Gifted to Grandchildren
An appeals committee under Israel's Real Estate Taxation Law in Lod recently dismissed an appeal filed by 12 minors who received apartments as gifts, seeking to benefit from a reduced tax rate applicable to "single apartments." The committee's chairman, Judge Avi Gorman, ruled that despite the properties being purchased with the grandfather's funds and a full legal separation of ownership from the parents, for purchase tax purposes each minor is still considered part of their parents' family unit, which already owns a residence.
The grandfather and his partner bought apartments in a Ramat Gan project for each of their 12 grandchildren and two great-granddaughters, paying about 3.5 million shekels per unit. Gift agreements signed in September 2023 stipulated that the grandfather would cover the apartment costs and all related expenses, including purchase tax. The agreements also established that after construction, the apartments would be rented out with rental income deposited into accounts solely in the minors' names, with parents barred from using the assets or income. The grandchildren could only sell the apartments after age 25, and only with court approval before then; rental income could be used freely from age 18.
In December 2023, the Real Estate Tax Authority ruled these apartments did not qualify as "single apartments" for tax benefits and issued a full purchase tax assessment. The minors argued that since the purchase was funded by their grandfather and ownership was fully separated from their parents, the "family unit presumption" should not apply. The Tax Authority countered that the benefit is intended to ease home purchases for family units, not investment properties for minors, some of whom are infants. It maintained that legal separation does not override the family unit presumption, and allowing the appeal would enable wealthy families to exploit the tax reduction, undermining the law's social purpose.
Judge Gorman sided with the Tax Authority, acknowledging the funding and ownership separation but emphasizing that these factors do not justify deviating from the family unit presumption for minors, unlike the exceptions made for spouses. He noted the purchase tax relief aims to support social goals by helping families acquire a home, whereas this case involves investment properties for minors who already live with their parents. The judge suggested that given the complexity of the family unit presumption, the legislature should consider whether to expand exceptions to cases like this. The appeal was rejected without ordering the appellants to pay legal costs, recognizing the issue's complexity.
The case was represented by attorneys Elisha Cohen and Ehud Erev for the appellants, and Eran Feirstein and Danit Elpasi Potsman for the respondent. Tax attorney Orit Levi Biton provided commentary but was not involved in the case. The decision highlights ongoing legal debates about tax benefits and family ownership structures in Israel.
