9. What are the international and domestic tax implications once a property is sold?

Compensation paid by the German government for property confiscated by the National Socialist Regime prior to or during World War II is exempt from federal tax under the U.S.-Germany tax treaty. Under the German Act Regulating Unresolved Property Claims, which was passed by the German government following the reunification of the German Democratic Republic and the Federal Republic of Germany, property is being returned, or compensation is being provided, to qualified claimants whose property located in the former German Democratic Republic was confiscated by the National Socialist Regime.

The awards of property or funds represent payments for damages sustained due to hostilities or political persecution. The exemption extends to the entire amount awarded, regardless of whether a portion represents interest. Pursuant to the treaty, the tax basis of award will be its fair market value at the time of receipt by a tax payer.