Liabilities include equity replacement loans and financial plan credits. If the loan or guarantee has replaced equity, the cost of the loan or guarantee is the cost of the asset. The term equity replacement loan refers to the treatment of shareholder loans in the event of insolvency.

Equity as a substitute for loans

Equity as a substitute for loans

As a result, expenses incurred by the shareholder as a guarantor of the company’s obligations no longer affect the subsequent acquisition costs of its contribution. So far, the BFH has always accepted subsequent acquisition costs in such cases when the loan or guarantee replaced equity. Subsequent acquisition costs then reduced the gain on disposal or liquidation, or subsequently increased a corresponding gain that could be offset with other active income.

In the future, such expenses will probably be booked as a private pleasure. The basis for this view was always the capital participation law, which had been abolished some time ago and replaced by a provision under insolvency law. To what extent this will affect the later acquisition costs has been a subject of controversy ever since. As a result of the current decision, the BFH is now clarifying that the legal basis for assuming subsequent acquisition costs has been removed.

This results in the essential restriction that subsequent acquisition costs will only be charged to the hgb. In this specific case, only the open and silent contributions and credits of the managing director to the company for which a subordinate agreement has been reached can result in subsequent closing costs. Defaults of so-called loans (without a subordination agreement) or of crisis-related loans as well as financial plan credits, and above all the use of a guarantee in favor of the company, are suppressed as subsequent acquisition costs.

Fortunately, however, the Federal Finance Court provides for a transitional provision, according to which loans and guarantees that have become “equity substitutes” by the time of the announcement of the verdict on 26 June 2017 can enjoy the protection of justified expectations and count as incidental acquisition costs. There are therefore special needs for shareholders’ accounts without a written loan agreement or guarantees if the company did not present a crisis situation on 30 June 2017.

In the case of a change of ownership, the new owners often do not have the legal requirement that real estate transfer tax be levied for the land held as fixed assets. more…..

Equity replacing credit 

Equity replacing credit 

The term equity replacement loan refers to the handling of shareholder loans in the event of insolvency. The Morkil has repealed this legal form with its provisions in §§ 30, 31 GmbHG (old version). The insolvency provisions (135 InsO) now apply, according to which lenders can refuse loan repayments to the shareholders of the company if repayment was made within one year prior to the application for bankruptcy against the company.

For old-timer cases in which both the awarding and the repayment of the shareholder loan took place before the deadline of December 31, 2008, the previous regulations continue to apply.

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