Judgment of the Münster Fiscal Court dated February 14, 2023, Ref. 1 K 3840/19 F and 1 K 3841/19 F

• The court obliges the tax office not to base the depreciation on the standardized useful life (§ 7 para. 4 sentence 1 EStG), but on the shorter actual useful life (§ 7 para. 4 sentence 2 EStG) presented by the plaintiff in an expert opinion; the established income is to be reduced accordingly by the higher depreciation amounts.

• Taxpayers may use any suitable method to justify a shorter useful life; a building fabric or ERAB appraisal is not mandatory as long as the relevant determinants (technical wear and tear, economic depreciation, legal restrictions) are clearly explained and the estimate remains within a reasonable range.

• Real estate valuation models (ImmoWertV, AGVGA NRW points model) can be used as a suitable method for determining/estimating the remaining useful life within the meaning of Section 7 (4) sentence 2 EStG; a restriction to certain appraisal methods would be legally incorrect.

• The additional profitability calculation requested by the tax office is not a prerequisite for the recognition of the shortened useful life; the submitted market value/remaining useful life expert opinion was sufficient and was not outside the permissible estimation framework.

Significant effect: Recognition of the higher depreciation leads to a reduction of EUR 13,409.14 in the assessed income for each year in dispute; the tax office bears the costs of the proceedings.

Facts of the case

The parties involved are in dispute for the years 2011 to 2016 (years in dispute) with regard to the deduction for wear and tear (AfA) for various buildings concerning their remaining useful life.

The plaintiff, an asset-managing GmbH & Co KG, has been the owner of the residential rental property G1 in N (built in 1960) and the residential rental property G2 in J (built in 1954) since 2009.

The depreciation assessment bases are no longer in dispute between the parties involved (G1 in N: EUR 702,260.86; G2 in J: EUR 560,054.86).

In 2016, the then competent tax office M carried out an external audit of the plaintiff for the years in dispute 2011 to 2013. The corresponding assessment notices were subject to review. During the audit, the external auditor took the view in particular that the assessment basis for the depreciation of the real estate owned by the plaintiff had been incorrectly determined by the plaintiff by taking a flat rate of 20% of the total acquisition costs of the buildings as the acquisition costs of the land, considering the remaining amounts as the acquisition costs of the buildings and depreciating them at 2% in accordance with Section 7 (4) sentence 1 no. 2 EStG. The external auditor was of the opinion that 39% of the acquisition costs were attributable to the land.

The tax office M agreed with the opinion of the external auditor and, on November 10, 2017, issued amending notices based on Section 164 (2) AO on the separate and uniform determination of income for the years in dispute 2011 to 2013, in which it increased the income from letting and leasing as a result of the reduction in the depreciation amounts and set it at EUR 36.013.30 for the 2011 year in dispute, to EUR 122,932.11 for the 2012 year in dispute and to EUR 64,974.39 for the 2013 year in dispute.

In its declaration of assessment for the 2014 year in dispute, the plaintiff also applied a flat rate of 20% of the total acquisition costs as the acquisition costs of the land and calculated depreciation at 2% in accordance with Section 7 para. 4 sentence 1 no. 2 EStG, which resulted in depreciation amounts of EUR 37,364. In contrast, the plaintiff applied depreciation for the buildings for the years in dispute 2015 and 2016 in accordance with Section 7 (4) sentence 2 EStG because it assumed a shorter useful life based on the expert's report. This resulted in depreciation of EUR 38,748.20 for the 2015 and 2016 years in dispute. However, in accordance with the results of the external audit for the years 2011 to 2013, the tax office M also assumed for the years 2014 to 2016 that 39 % of the acquisition costs would be attributable to the land. It took into account depreciation amounts totaling EUR 30,164 for the years in dispute 2014 to 2016. Compared to the declaration of assessment, the tax office M increased the income from letting and leasing for the 2014 to 2016 years in dispute as a result of the reduction in the depreciation amounts and determined this to be EUR 102,001.79 for the 2014 year in dispute, EUR 100,601.01 for the 2015 year in dispute and EUR 72,979.50 for the 2016 year in dispute in notices dated 10.11.2017 (2014 and 2015 years in dispute) and 16.01.2018 (2016 year in dispute).

The plaintiff lodged an appeal against the assessment notices for the years in dispute (received by the defendant: 16.11.2017 for the years in dispute 2011 to 2015; 17.01.2018 for the year in dispute 2016). It argued that the depreciation pursuant to Section 7 (4) sentence 2 EStG should be deducted on the basis of the actual useful life and therefore in accordance with the remaining useful life. It derived this from an expert opinion by the certified architect Ms. S K , publicly appointed and sworn expert (appraiser), dated 07.02.2017. This expert opinion, the content of which is referred to in full, contains a market value assessment for the plaintiff's real estate portfolio as at the date of acquisition of the respective property in accordance with the Real Estate Valuation Ordinance (ImmoWertV) of 19.05.2010 (BGBl I 2010, 639) as well as the remaining useful life of the respective property (see in particular the overview of results on page 3 of the expert opinion). With regard to the determination of the remaining useful life, the appraisal is based on the provisions of the Real Estate Value Ordinance (Section 6 (6) of the Real Estate Value Determination Ordinance - ImmoWertV - dated May 19, 2010, Federal Law Gazette I 2010, 639). The remaining useful life is generally determined by deducting the age from the total useful life of the buildings. If conversion and extension or modernization and renovation measures were carried out in the past that extended the total or remaining useful life, the appraiser estimated the remaining useful life, taking these modernization measures into account, using Annex III to the property value model of the Chairman of the Expert Committees in North Rhine-Westphalia (AGVGA NRW) in the version dated 09/09/2008.The appraiser determined a remaining useful life of 31 years for the buildings of the rental property G1 in N and a remaining useful life of 35 years for the buildings of the rental property G2 in J. On this basis, the plaintiff calculated the depreciation for the buildings in accordance with § 7 para. 4 sentence 2 EStG.

After reviewing the expert opinion submitted for each of the years in dispute, the defendant, which had become responsible in the meantime, came to the conclusion that the allocation of the acquisition costs of the properties on the basis of land and buildings was not objectionable. However, it did not agree with the plaintiff's request to determine the depreciation for the buildings in accordance with Section 7 (4) sentence 2 EStG. From the defendant's point of view, the remaining useful life stated in the expert opinion could not be the basis for a higher depreciation, as it was a purely mathematical calculation based on the reporting date. There were no indications of premature technical consumption in the expert opinion, nor had these been presented. The plaintiff therefore had to credibly demonstrate that the buildings had actually been economically consumed on the dates stated by it. In the defendant's view, this required a profitability calculation for each individual property, which also had to include future renovation measures.

In the course of the further review, the defendant came to the conclusion that the expert opinions submitted could lead to a correction within the meaning of Section 367 (2) sentence 2 of the German Fiscal Code (AO). The allocation of the acquisition costs to land and buildings, which differed from the results of the external audit, resulted in lower acquisition costs for the buildings. Taking into account the standard depreciation, this would result in lower depreciation for the years in dispute, which would have to be taken into account as income-related expenses for income from letting and leasing. The defendant informed the plaintiff of this and of the possibility of withdrawing the objection in letters dated 14.01.2019 and 04.07.2019.

The defendant also obtained an opinion from a building expert from the North Rhine-Westphalia tax authorities in December 2018. In his building expert's report dated 14.12.2018, the building expert stated that with an exemplary remaining useful life of 15 years for a building, it could not necessarily be assumed that the building was in such a condition that further intended use would appear unreasonable. In order to prove the shortened useful life, it is necessary for the expert to demonstrate that the building was subject to premature wear and tear or economic deterioration at the time of acquisition. In this respect, a profitability calculation is helpful, which compares the income such as rents or leases with the expenses, e.g. management costs, of the respective buildings. As long as a tolerable net income or a building income share from the property remained, it could not be assumed that the property was uneconomical.

Subsequently, the plaintiff submitted an example of the expert's profitability calculation for three of the properties belonging to its sister partnership, which in its opinion met the defendant's requirements. It is clear from the explanations of the procedure for this calculation that, from the expert's point of view, an investment only makes economic sense if the value of the investment property increases accordingly. The expert therefore determined the costs that would be necessary for a comprehensive renovation after the end of the normal useful life. The expert compared this with the market value that would result on the basis of the modified remaining useful life and achievable rents as a result of the renovation and modernization measures. Since, in the opinion of the appraiser, the above-mentioned calculations relate to future costs and values, but economic changes and developments cannot be predicted in principle, she derived the change and development of the value-relevant input variables over the period up to the expiry of the respective remaining useful life on the basis of the period of ten years prior to the respective valuation date. The value and price changes and developments are very different for the individual input variables and are derived separately for each variable. Based on these principles, the expert carried out the following profitability calculation (see Annex K 7 to proceedings 1 K 3840/19 F, page 7 et seq.):

From an economic point of view - according to the expert's explanations - a renovation and modernization would not be profitable after the expiry of the respective remaining useful life, since a property interest rate of 3% below the respective lowest value of 2001 and 2011 would result in a market value corresponding to the renovation and modernization costs.

In objection decisions dated 29.11.2019, the defendant rejected the plaintiff's objections to the exemption notices for the years in dispute as unfounded and increased the income from letting and leasing determined for the years in dispute in accordance with the notice of rectification. The defendant argued that the requirements for depreciation according to the actual useful life pursuant to § 7 para. 4 sentence 2 EStG were not met. A shorter useful life based on economic wear and tear could only be used as a basis for depreciation if the asset was objectively economically used up before the end of the technical useful life, i.e. the possibility of economically viable use or utilization had definitively ceased. This requires tangible evidence. The starting point for the required technical estimate is the useful life of the shell as the main component of the building. It is generally not sufficient that only individual and independent parts of the building are due for renewal or replacement. Rather, it is necessary for the building as a whole to be impaired in its usability due to technical wear and tear of the load-bearing parts. Such impairments were not apparent either from the expert opinion for the individual properties or from the plaintiff's submission. The plaintiff had also not credibly demonstrated a shorter useful life for economic reasons. In the expert opinion submitted by the plaintiff, the remaining useful life is calculated purely mathematically from the difference between the total economic useful life and the age of the building on the valuation date. Accordingly, the discounting to be taken into account in the capitalized earnings value method results from the ratio of the remaining useful life to the total useful life. In view of this, the appraiser had extended the purely mathematically determined remaining useful life by way of estimation with regard to the modernization measures already carried out. The remaining useful lives estimated in the expert opinion for the purposes of determining the asset or income value could not be adopted for the purposes of § 7 para. 4 sentence 2 EStG due to the differences in the scope of application and the objective of this determination. The provisions on deductions for wear and tear or depreciation serve the purpose of distributing the taxpayer's expenses for the acquisition or production of an asset used to generate income over a certain period of time. In contrast, the provisions of the ImmoWertV and the asset value guidelines serve to determine the asset or income value of a building on a specific reference date. The value is determined according to a point-by-point and therefore static approach. It is true that the relevant provisions for determining the value also provide for the determination of a remaining useful life. However, this is not the actual objective, but merely a calculation parameter for determining the present value factor in the income capitalization approach and the related point-by-point determination of the building value.

The exemplary profitability calculation submitted by the plaintiff (for the properties of its sister partnership) was also not suitable to substantiate a shortened useful life for economic reasons. Overall, no reasons were apparent from the documents submitted and the plaintiff's presentation that would support a shortened useful life for economic reasons. Rather, due to a new allocation of the acquisition costs of the real estate, land and buildings, there was a reduction in the assessment basis for depreciation for the buildings. The depreciation was to be determined in accordance with § 7 para. 4 sentence 1 no. 2 letter a EStG in the amount of 2 % of the acquisition costs of the buildings and amounted to EUR 14,045.00 per year for the buildings of the rented residential property G1 in N and EUR 11,201.00 per year for the buildings of the rented residential property G2 in J, i.e. a total of EUR 25,246.00 per year.

With its action brought against this (received by the court: 20.12.2019), the plaintiff continues to request the recognition of depreciation amounts on the basis of a shorter useful life in accordance with Section 7 (4) sentence 2 EStG. It argues that in the expert opinion it submitted, the shares of the land were determined on the basis of the statutory framework conditions. The market value of the respective properties was determined on the basis of the condition of the acquired property substance at the time of the respective transfer of ownership. The valuation was based on the basic regulations of the ImmoWertV and the valuation guidelines as well as the AGVGA NRW procedure. In addition, the Building Code, the Land Use Ordinance and the German Civil Code had to be observed as legal bases. The market value was determined using the income capitalization approach and the percentage allocation of the land was determined. In addition, the expert had also determined the current and shortened remaining useful lives of the respective buildings. She had explained that none of the buildings in dispute had a remaining useful life of more than 35 years. According to Section 6 (6) ImmoWertV (in the version valid for the years in dispute), the remaining useful life is the period in which the buildings can still be used economically if properly maintained, in which they still meet the changing requirements for buildings such as construction, floor plan and building design, fittings and finish, whereby proper maintenance and management includes, in particular, proper maintenance. This determined period is recognized in general economic and legal life in addition to a market value determined using the capitalized earnings value method.

The evidence of a shortened remaining useful life of the buildings was provided in the present case by the expert's confirmation. The plaintiff had not only demonstrated the extent to which the actual useful life was based on comprehensible calculation parameters and recognized calculation models by means of undefined future prospects, but also by means of a profitability calculation.

Modernization measures extend the remaining useful life of buildings in accordance with the regulations set out in the AGVGA NRW. The expert had also taken this into account in the profitability calculation. The economic useful life takes into account both the technical and economic aspects of the service life of buildings, whereby this useful life is determined on the basis of empirical experience.

In Section 7 (4) sentence 2 EStG, the legislator has created the possibility for a taxpayer to demonstrate the actual useful life for the purpose of depreciation. There must therefore also be a real opportunity to provide such evidence. In the expert opinion, it was explained in detail for each property in the real estate portfolio what the state of preservation was and which other circumstances had an influence on the determination of the respective property value or the respective remaining useful life.

The calculation for the example of the property of the sister company ... in ... was correct. The renovations took place 34 and 14 years ago, respectively, in relation to the valuation date. According to the asset value model of the AGVGA NRW and the corresponding Annex III, deductions were to be made from the table values if the renovation work had been carried out more than 20 years previously. The table values do not refer to the points under "b) Modernization elements" according to the points grid, but to the tables for the modified remaining useful life mentioned under c). Since a large part of the renovation work on the property in question was carried out well over 20 years ago, the expert had rightly applied a discount of 10% to the table values.

The fact that a market value appraisal can be used to prove a shortened remaining useful life of real estate can also be seen in particular from the ruling of the Federal Fiscal Court (BFH) of 28.07.2021 IX R 25/19 (BFH/NV 2022, 108). A claimant can use any method of presentation that is suitable for demonstrating an appropriate estimation framework as part of their presentation. As long as the evidence does not leave the reasonable estimation framework of Section 7 (4) sentence 2 EStG, an expert opinion can prove the necessary maximum probability of the shorter actual useful life.

The plaintiff requested that

1. to amend the notices on the separate and uniform determination of income for 2011 to 2015 dated 10/11/2017 and for 2016 dated 14/01/2018, in each case in the form of the objection decisions dated 29/11/2019, in such a way that the determined income is reduced by EUR 13,538.20 in each case due to the additional depreciation amounts,

Alternatively,

2. to allow the appeal.

The defendant requested

to dismiss the action.

The defendant refers to the objection decision as grounds and additionally submits that it is not inconsistent to adopt the apportionment ratio of land and property from the expert opinions submitted by the plaintiff, but not the remaining useful life of the respective buildings. The market value of a property or the allocation of the market value to land and buildings does not change just because the requirements for depreciation pursuant to Section 7 (4) sentence 2 EStG are not met. Furthermore, there was no reason for the defendant to object to the apportionment of the acquisition costs of the properties carried out by the plaintiff itself. The defendant was also unable to follow the expert's profitability calculations. The decisive factor is how an investment by the plaintiff affects the useful life of the property and the resulting current income. It was not comprehensible why the investments assumed by the plaintiff were not profitable.

The expert opinion submitted by the plaintiff was also objectionable in other respects. This applies, for example, to the property "G1". With an age of 49 years, a total useful life of 80 years and a score of six points according to the AGVGA NRW, the expert arrived at a remaining useful life of 31 years. According to the points grid of the AGVGA NRW, there is no extension at 6 points, according to the expert's explanation. This calculation of the remaining useful life is not readily comprehensible. According to Appendix III to the asset value model of the AGVGA NRW, it can be seen under the heading "Degree of modernization" that the degree of modernization is to be determined on the basis of a specified points grid. Depending on the total useful life, the age and the degree of modernization of the building, the remaining useful life to be assumed is shown. From the table for an 80-year total useful life, it can be seen that with a score of 6 to 10 points and a building age of 50 years, a remaining useful life of 34 years can be assumed. This would therefore also have to be the case for a minimum age of 49 years. How the expert came to the conclusion that the remaining useful life should not have been extended from 31 years to 34 years is not clear from the expert opinion. This finding could lead to a change in the ratio of market values between land and buildings for some properties.

The oral hearing before the Senate took place on 14.02.2023. Reference is made to the minutes for details.

Reference is made to the exchanged written submissions, the administrative files consulted and the case file for further details of the facts of the case and the dispute. The court has included the files of case 1 K 3840/19 F in the proceedings.

Reasons for the decision

The admissible action is well-founded. The notices on the separate and uniform determination of tax bases for the years in dispute 2011 to 2016 are unlawful in this respect and violate the plaintiff's rights, Section 100 para.1 sentence 1 of the German Fiscal Court Code (FGO), as the defendant used the standardized useful life pursuant to § 7 para. 4 sentence 1 no. 2 letter a EStG and not the shorter useful life declared by the plaintiff pursuant to § 7 para. 4 sentence 2 EStG as the basis for determining the plaintiff's income from letting and leasing.

1. a) In the case of assets whose use or utilization by the taxpayer to generate income is expected to extend over a period of more than one year, the portion of the acquisition or production costs that is attributable to one year if these costs are distributed evenly over the total period of use or utilization (depreciation in equal annual amounts, § 7 para.1 sentence 1 EStG); the deduction is based on the normal useful life of the asset (§ 7 para. 1 sentence 2 EStG). Deviating from this, the depreciation for a building used to generate income is determined according to the fixed percentages of § 7 para. 4 sentence 1 EStG; the regulation represents a legal standardization of the useful life within the meaning of § 7 para. 1 sentence 2 EStG. In accordance with Section 7 (4) sentence 2 EStG, the depreciation corresponding to the actual useful life of a building can be applied instead of the depreciation in accordance with Section 7 (4) sentence 1 EStG. The useful life within the meaning of Section 7 (4) sentence 2 EStG is, in accordance with Section 11c (1) EStDV, the period during which a building can be expected to be used for its intended purpose. The useful life to be estimated is determined by technical wear and tear, economic depreciation and legal circumstances that may limit the useful life of an asset. The technical useful life, i.e. the period in which the asset is subject to technical wear and tear, is the starting point. If the economic useful life is shorter than the technical useful life, the taxpayer can invoke this. Whether the depreciation is based on a shorter useful life than the standardized periods provided for by law (§ 7 para. 4 sentence 1 EStG) within the meaning of § 7 para.4 sentence 2 EStG can be taken as a basis is assessed according to the circumstances of the individual case (BFH ruling of 28.07.2021 - IX R 25/19, BFH/NV 2022, 108, para. 17, with further references).

b) It is up to the taxpayer to demonstrate a shorter actual useful life in individual cases - within the scope of the duty of cooperation incumbent on him (see BFH ruling of 11.08.1993 - X R 82/90, BFH/NV 1994, 169) - and, if necessary, to provide evidence within the scope of the burden of proof incumbent on him. The assessment of the circumstances presented by plaintiffs in this respect is then incumbent on the tax court (Finanzgericht, FG) as the court of fact in the action (BFH, judgment of 28.07.2021 - IX R 25/19, BFH/NV 2022, 108, para. 18, with further references).

aa) In order to demonstrate the shortened actual useful life of a building used to generate income, the taxpayer may use any method of demonstration that appears suitable in the individual case to provide the necessary evidence. In this respect, it is necessary that the taxpayer's explanations provide information on the relevant determinants - e.g. technical wear and tear, economic depreciation, legal restrictions on use - which influence the useful life in the individual case, and on the basis of which the period in which the relevant building can probably be used in accordance with its intended purpose (Section 11c para.1 EStDV), is to be determined with sufficient certainty by means of an estimate (BFH ruling of 28.07.2021 - IX R 25/19, BFH/NV 2022, 108, para. 19).

bb) The provision of Section 7 para. 4 sentence 2 EStG grants the taxpayer the right to choose whether to be satisfied with the standardized depreciation rate in accordance with Section 7 para. 4 sentence 1 EStG or to claim and substantiate an actually shorter useful life. The taxpayer's estimate must be used as a basis as long as it is based on considerations that a reasonably prudent taxpayer would normally make. Since the taxpayer's estimate cannot require certainty about the shorter actual useful life, but at best the greatest possible probability, it can only be rejected if it is clearly outside the reasonable estimation framework (BFH ruling of 28.07.2021 - IX R 25/19, BFH/NV 2022, 108, para. 20, with further references).

(1) Against this background, the submission of a building substance report, in particular the determination of the condition of real estate with the help of the so-called ERAB method (method for determining the wear and tear stock of building materials), is not a prerequisite for the taxpayer to recognize a shortened actual useful life. Therefore, if the taxpayer or an expert commissioned by the taxpayer chooses a different verification method for comprehensible reasons, this can be the basis for the estimate of a shortened actual useful life required in individual cases - if necessary, taking into account appropriate adjustments (see BFH decision of 19.01.2018 - X B 60/17, BFH/NV 2018, 530) - insofar as conclusions can be drawn from the chosen method about the determinants to be determined. Since only the greatest possible probability of a shorter actual useful life can be required in the context of the estimate, a narrowing of the expert opinion methodology or a commitment to a specific determination procedure would overstretch the requirements for the burden of proof (BFH ruling of 28.07.2021 - IX R 25/19, BFH/NV 2022, 108, para. 21 f.).

(2) In this context, the procedure for determining the real value of buildings (§§ 21 et seq. in conjunction with § Section 6 (6) ImmoWertV of 19.05.2010, BGBl I 2010, 639) can also be applied within the framework of Section 7 (4) sentence 2 EStG. Even if the model used to derive the economic remaining useful life for residential buildings, taking into account modernizations, is not primarily aimed at determining the actual useful life within the meaning of Section 7 para.4 sentence 2 EStG, such a model can be suitable for forming a reliable conviction about the basis of estimation to be applied in individual cases (see BFH ruling of 28.07.2021 - IX R 25/19, BFH/NV 2022, 108, para. 24, on Annex 4 of the SW-RL). There is no justification to deviate from the (building law) principle of equivalence of the valuation methods for tax law reasons (see BFH, judgment of 20.09.2022 - IX R 12/21,BFH/NV 2023, 186, para. 41, on the choice of valuation method when dividing a total purchase price for a property into land and land share and building share for the purposes of depreciation).

2. a) Based on these principles, the Senate has come to the conclusion, on the basis of the expert reports submitted by the plaintiff, that the shortened actual useful life within the meaning of Section 7 (4) sentence 2 EStG was correctly applied with regard to the properties in dispute and that the following depreciation amounts result for the years in dispute:

b) The determination of the depreciation amounts requested by the plaintiff for deduction is not objectionable.

aa) In the case in dispute, the plaintiff submitted valuation reports from a publicly appointed and sworn expert for each of the buildings in dispute. In her appraisal, this expert determined the capitalized earnings value for the plaintiff's entire real estate portfolio in accordance with § 17 para. 2 sentence 1 ImmoWertV in the version valid for the years in dispute. In her valuation of the buildings in dispute, the expert had to take into account the age and remaining useful life of the individual buildings. In the opinion of the recognizing Senate, the appraiser determined a remaining useful life (deviating from § 7 para. 4 sentence 1 EStG) in each case on the basis of objective criteria. Following an on-site inspection, she determined the condition of the outdoor facilities and communal facilities and showed the condition of the individual buildings.

As part of the determination of the capitalized earnings value, the appraiser also determined the remaining useful life in accordance with Section 6 (6) ImmoWertV. In this regard, the expert stated in her report on p. 14 et seq. that the remaining useful life is generally determined by deducting the age from the total useful life of the buildings. If conversion and extension or modernization and renovation measures are carried out, which extend the total or remaining useful life, this procedure is not possible and the remaining useful life must be estimated. For this estimation, the AGVGA NRW has developed a scoring method that can be used to determine the modified remaining useful life in a table. However, if the renovations and modernizations were more than 20 years old on the valuation date, the AGVGA NRW recommended reducing the table values by a corresponding discount.

Furthermore, the expert stated in her report that the two properties to be valued had been fitted with wooden windows with single glazing and stove heating. According to the construction files, the stove heating systems were removed between 1970 and 1980 and electronic storage, gas floor or gas central heating systems were installed. It can be assumed that the wooden windows were also replaced by plastic windows with insulating glazing at this time. According to the points grid of the AGVGA NRW, a total of four points were awarded for these modernizations, which were to be assessed as minor modernizations as part of proper maintenance. The modified remaining useful life resulting from the corresponding table depending on the total useful life and the age of the respective property is reduced by 20 % as the modernizations were carried out more than 20 years ago. A modification in the form of an extension of the remaining useful life results from modernizations, especially the older a building is, the younger a building is, the less the modernizations have an effect on the extension of the remaining useful life.

As the total useful life, the appraiser used the total useful life used by the locally responsible appraisal committee. The appraisal committee N generally assumes 80 years for multi-family residential buildings (page 21 of the appraisal report) and the appraisal committee J generally assumes 90 years for buildings used for residential purposes (page 29 of the appraisal report).

bb) The Senate follows the well-founded explanations of the appraiser.

As in the proceedings decided by the BFH (BFH ruling of 28.07.2021 IX R 25/19, BFH/NV 2022, 108), the expert carried out a model-based determination of the remaining useful life. As in the case underlying the BFH ruling, in addition to the model calculation, an inspection of the buildings was carried out in order to assess the construction method and any outstanding modernization or refurbishment work. The fact that a model calculation was also used to determine the total useful life in accordance with the specifications of the locally responsible expert committees does not prevent the expert opinion from being recognized. According to the case law of the BFH - as already explained - the fact that a calculation method used by the expert is based only on a model economic remaining useful life is not of decisive importance; the taxpayer can use any method of presentation that appears suitable in the individual case to provide the necessary evidence to demonstrate the shortened actual useful life. In this respect, it is necessary that the taxpayer's presentation provides information on the relevant determinants such as technical wear and tear, economic depreciation and legal restrictions on use, which influence the useful life in the individual case (BFH ruling of 28.07.2021 IX R 25/19, BFH/NV 2022, 108 para. 19). This is also how the expert proceeded here, so that - contrary to what the defendant stated at the hearing - there is no need for any explanations on the technical wear and tear of the buildings and the economic usability or rentability of the apartments beyond those already sufficiently provided in the expert opinion. In the course of preparing the expert opinion, the expert determined the location of the properties and the legal circumstances as well as the condition of the outdoor facilities, the furnishings of the apartments in the individual buildings, the construction method, the state of maintenance and the determinants relevant for determining the capitalized earnings value. In particular, the expert also took into account the degree of modernization of the individual buildings when determining the remaining useful life and made sufficiently substantiated statements on this in the expert opinion.

In the case in dispute, this led to the assessment of the remaining useful lives of the individual buildings owned by the plaintiff, which was comprehensible to the court. In any case, these results are not (significantly) outside the admissible estimation framework.

(2) The defendant's other objections are also not valid.

(a) Nothing else follows from the defendant's objection in the lawsuit that the profitability calculations submitted as examples for three properties of the sister partnership could not prove that the properties would be used up after the expiry of the "regular" useful life. If the investment forecast by the expert were not carried out at the end of the supposedly "regular" useful life in 2041, but at an earlier date, higher rents would be achievable earlier, so that the achievable net income would probably increase and the remaining useful life of the property would be extended (see statement of 22.04.2020, page 2 f.).

This consideration does not sufficiently take into account the fact that the appraiser has factored in an increase in rent when calculating the annual gross income, which (after deducting the management costs) affects the amount of the annual net income and has therefore been taken into account in the market value. The defendant's assumption that higher modernization and maintenance costs at an earlier point in time led to an overall higher net income than that on which the appraiser based her valuation is therefore not compelling. Moreover, the increase in rents assumed by the appraiser will only occur on a regular basis - i.e. without taking into account the particularities of the respective rental market - if renovations and modernizations are carried out at a corresponding cost. Without such renovation and modernization measures, the annual gross income will typically not increase but fall, which would even result in a shorter useful life.

Moreover, the profitability calculation was prepared subsequent to the expert opinion at the request of the defendant, so that it is already questionable whether this is at all decisive for the recognition of the remaining useful lives determined in the expert opinion. Rather, the expert opinion is already comprehensible on its own, so that a future-oriented profitability calculation, which includes a large number of hypothetical causal processes, is not decisive for determining the remaining useful life on a specific cut-off date in the past.

(b) Insofar as the defendant states that, according to his understanding, when applying the asset value model of the AGVGA NRW with reference to Annex III, a discount may be permissible in the points valuation, but not from the remaining useful life, he has also not sufficiently shaken the assumption of an informed determination of the respective remaining useful life. According to Annex III letter c, the deduction is left to the (expert) user and should be made at the expert's discretion for five years (cf. p. 180 of the court file). Moreover, the foreword to the model of the AGVGA NRW states that Annex 3 (also) serves as a guide and has the character of a guideline, but cannot cover all cases that arise in practice, which is why a different assessment may be made in individual cases within the scope of the expert's discretion.

3. the decision on costs follows from Section 135 (1) FGO. The decision on provisional enforceability is based on Sections 151 (3), 155 FGO in conjunction with §§ Sections 708 no. 10, 711 of the Code of Civil Procedure.

4. the appeal on points of law was not admissible. The case is neither of fundamental importance (§ 115 Para. 2 No. 1 FGO) nor does the further development of the law or the safeguarding of uniform case law require a decision by the BFH (§ 115 Para. 2 No. 2 FGO). Rather, it is an individual case decision based on the application of generally recognized principles of case law.

https://nrwe.justiz.nrw.de/fgs/muenster/j2023/1_K_3841_19_F_Urteil_20230214.html