The Normative Framework
- Section 102 of the law states that "the administrator shall refund tax if it is proven to him that the sale of a right in real estate or an action in a real estate association on which tax was paid has been canceled." It is clear that not every case in which a party to a transaction claims that it has been canceled, or even both parties to the transaction claim that it has been canceled, should it be recognized as a canceled transaction, which entitles it to a refund of the tax paid. It is necessary to examine whether the transaction was in fact canceled, in the sense that it should be treated as if it had never been born in the first place, or whether it is in fact a new transaction, in which the buyer sells the real estate to the seller in a resale ("resale"), or realizes the transaction in some other way (for example, transfers it to a third party).
- The main test in this matter has long since been determined .
Other Municipal Applications 304/85 Land Appreciation Tax Administration v. Zemer, (January 4, 1988) (hereinafter: "the Zemer case") it was held that the distinction between the cancellation of a transaction and a resale is in answer to the question of whether the transaction was absorbed (or sent roots) in the ground of reality, or not. In a case where the transaction is to be seen as having been absorbed into reality, it should not be regarded as having been canceled.
Thus it is said in the case of Zemer (paragraph 11):
"If the gift of rights to the apartment, even though it was completed, as we have seen, did not send its roots and was not absorbed into the ground of reality, if it was not reflected in the facts on the ground, or as the Administrator's counsel said, if it was not realized in the practical world, then the new transaction can be reconciled with the cancellation of the gift. This is not the case, if the gift had factual consequences, if it has become an act that cannot be torn and uprooted from the ground of reality and cancelled as if it had never existed, then it is not possible to turn back the wheel, and the only open way to return the rights to Liora is by means of a new transaction of a gift, from the Respondent to Liora. In the circumstances of the case, it cannot be said that the gift was not absorbed in the factual reality. The respondent bought possession of the apartment. The apartment was even registered in her name with the property tax authorities. It was also rented out after the respondent evicted it. However, the father took care of all of this. He also financed the purchase of the apartments for his daughters, but he did not act as an intervening foreigner. He acted by virtue of the respondent, who, upon completion of the gift, had the right to receive ownership of the apartment instead of Liora. All of this is compounded by the long period of about six years from the gift transaction to the cancellation notice. There is, however, no legal impediment to canceling a gift by consent at any time. But the passage of time has weight, which adds up to the weight of the other facts I have mentioned. When it comes to annulment of relations within the family, without any legal grounds or agreement, it is necessary to be careful with those who claim it, and all of these can suffice in order to reach the conclusion that the real essence of the second transaction is not cancellation, but rather the return of the gift to Liora by way of a new gift transaction."