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V0848-24 23 April 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · pérdida patrimonial

Demolition of a building results in a capital loss included in the general tax base

A taxpayer asks whether the demolition of an inherited building generates a capital loss and how to calculate the value of the construction. The DGT rules that demolition constitutes a change in assets that results in a loss, and that the cost of demolition increases the acquisition value of the land.

The question raised

1st It is requested to know whether the demolition originates a capital loss for the purposes of calculating Personal Income Tax, its integration into the general or savings tax base and its method of calculation, specifically, whether the value in the inheritance deed could be prorated between the cadastral values of the land and the construction of 2020.

The DGT's ruling

The demolition of a dwelling constitutes an alteration in the composition of assets that results in a capital gain or loss. If there is no insurance compensation, the loss is the acquisition value of the part of the building, excluding the land. If the value of the construction is unknown, it can be calculated by prorating the acquisition value between the cadastral value of the land and the construction for the year of acquisition. Demolition expenses are considered investments and improvements that increase the acquisition value of the land for future transfers.

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