Appeals Committee (Center) 49040-09-24 Yuval Burger v. Director of Real Estate Taxation, Central District

Judgment

Judge Avi Gurman:

A grandfather financed for his minor grandchildren, the purchase of residential apartments - one for each grandchild.  Every grandchild is part of a family unit, in which the parents already have a residential apartment.  Will the purchase of the apartments by any of the minors be considered for the purpose of purchase tax as the purchase of a single apartment? - This is the legal question at the center of this appeal.

The appeal was filed against the decision of the Central District Land Taxation Administration (hereinafter: "the Respondent"), in which an objection filed by the appellants to the purchase tax assessments issued to them by virtue of the Real Estate Taxation (Appreciation and Purchase) Law, 5723-1963 (hereinafter: the "Law") was rejected.

As stated, the dispute between the parties deals with the question of whether the appellants, who are minors, are entitled to purchase tax brackets that apply to the purchase of a single residential apartment, in accordance with section 9(c1c)(4) of the Law (hereinafter: the "section" or "the section of the law").  The respondent argues that the presumption of the family unit applies in their case, and therefore the apartments that were purchased are not considered the only apartments of the purchasers - the minors.

The appellants, on the other hand, claim that this is a case in which the presumption of the family unit was refuted, in light of the exceptional circumstances that show that the purchase was not made from the minors' parents' money, but rather as a gift from their grandfather, while creating a contractual mechanism that ensures a complete property separation between the gift apartment and the parents of each minor.

The main facts:

1. The appellants are 12 minors (hereinafter: "the appellants" or "the minors"), of whom 10 are the grandchildren of Mr. Hanan Shahaf and the two granddaughters of Ms. Esther Shahaf, the spouse of Mr. Shahaf.
2. The minors belong to four different family units, each of which owns a residential apartment - even before the purchase of the apartments in dispute.
3. Shahaf conducted negotiations with Neve Shuster in a tax appeal for the purchase of 12 residential apartments in a construction project on Rashi Street in Ramat Gan (hereinafter: the "Project"). As a result, on September 18, 2023, Mr. Shahaf signed gift agreements with each of the minors, through their parents - their natural guardians, according to which he would grant each minor a sum of ILS 3,541,000 for the purchase of a residential apartment, as well as pay all expenses involved in the purchase, including purchase tax.

As can be seen from the gift agreements, the purpose of the gift was Mr. Shahaf's desire to ensure the future of his grandchildren and his spouse's grandchildren, by providing them with financing for the purchase of residential apartments and by ensuring through a contractual mechanism that he would do so.

4. According to the waiting agreements, the apartments will be rented out after the construction is completed, and the rent will be deposited in a designated account in the name of each minor, while the minors' parents will not be allowed to make any use of the rent or live in the apartments. Minors will be allowed to sell or mortgage the apartment only when they reach the age of 25, and to make unlimited use of the rent only when they reach the age of 18.  In the event that the sale of the apartment is required before the minor reaches the age of 25, the sale will be made with the approval of the court.

In order not to elaborate on what is not required, I will note that there is in fact no dispute that the agreements created a property separation between the apartments and their fruits, and the appellants' parents.

5. The Ottoman Settlement [Old Version] 1916On September 20, 2023, the minors' parents, on behalf of the minors, signed purchase agreements for 12 residential apartments in the project, by Neve Shuster Ltd. The purchase price for each apartment was ILS 3,541,667.
6. 12-34-56-78 Chekhov v. State of Israel, P.D.  51 (2)Taking into account the fact that the appellants are minors, the gift and sale agreements were forwarded to the Custodian General for review and subsequently received the approval of the Family Court in Be'er Sheva, in the framework of family case 4186-10-23; 4195-10-23; 4210-10-23; 4177-10-23.  The court approved the gifts and sale agreements, and determined, in accordance with the agreement, that the minors would not be obligated to pay and expenses for the purchase, that the rights would be registered in their name as a complete gift, and that the rental money would be deposited in a separate account in the name of each minor - all as stated in the gift agreements.

In light of the aforesaid, there is no dispute that if the appeal is rejected, it is the grandfather, Mr. Shahaf, who will bear the financing of the disputed purchase tax.

7. On November 28, 2023, the minors, through their parents, declared the purchase of the apartments to the respondent and made a self-assessment for purchase tax according to tax brackets for a single apartment - in the amount of ILS 75,768 per purchaser.
8. On December 13, 2023, the respondent rejected the declarations of the minors and set a purchase tax assessment - in the amount of ILS 283,333 for each purchaser, according to tax brackets for a non-unit apartment. The Respondent's reasons for the postponement were based, inter alia, on Executive Order 6/2011, which determined that the purchase tax would be calculated according to a second apartment in the case of apartments owned by a minor, if the source of the funds came from family members and relatives.
9. On December 20, 2023, the appellants filed an objection to the respondent's decision, and on August 11, 2024, a hearing was held on the objection. On August 20, 2024, the Respondent rejected the objection of the minors.

Hence the appeal before us.

10. In the framework of a pre-trial meeting (dated May 22, 2025), the respondent announced in response to the court's question that the respondent does not dispute that the financing for the purchase of the apartments was made from the grandfather's money, Mr. Shahaf.
11. When it became clear that there were no factual disputes between the parties, but only legal ones, the parties announced that there was no need for an evidentiary hearing. The parties submitted a list of conventions and agreements and requested that the case be set for the submission of written summaries - and this was done.

In the list they submitted, the dispute between the parties was summarized as follows: