May 12, 1995
Compensation Paid by Germans
for WW II Losses Exempt
WASHINGTON - The Internal
Revenue Service today announced that compensation paid by the German government for
property confiscated by-the National Socialist Regime prior to or during World War II is
exempt from U.S. taxation under the U.S.-Germany income tax-treaty.
Subsequent to the reunification of the German Democratic Republic (GDR) and the Federal
Republic of Germany, the German government is returning property or providing compensation
to qualified claimants whose property located in the former GDR was confiscated by the
National Socialist Regime. U.S. taxpayers who have received the compensation from the
German government have asked for guidance on the U.S. tax consequences of these awards.
The IRS has determined that awards under the German compensation programs for property
confiscated by the National Socialist Regime represent payments for damages sustained as a
result of hostilities or political persecution and, as such, are exempt from U.S. taxation
under the Treaty. In addition, under the Treaty, the tax basis of any property received
will be its fair market value at the time of receipt by the taxpayer. The German competent
authority has concurred in this result under the Treaty.
Notice 95-31, which provides guidance on this matter, is attached and will appear in
Internal Revenue Bulletin 1995-22 dated May 30, 1995.
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