Living in an Apartment Not Registered in Your Name? The Impact on Capital Gains Tax and Purchase Tax

The judgment in C.C. (District Court, Nof HaGalil) 46974-05-25 (Nabila Katz v. State of Israel) deals with an unusual but important scenario: a plaintiff who has lived in an apartment for decades claims that the apartment was purchased for her and her late husband back in 1967, but she has no purchase documents. In the rights register, the apartment is registered in the name of the State of Israel. The plaintiff applied to the court for a declaratory judgment recognizing her as the owner of the rights in the apartment and ordering that the rights be registered in her name.

This case clearly illustrates the gap between the reality on the ground – long-term possession and conduct as owners – and formal certainty – registration plus the written document requirement.

According to the publications and the summary available to us, the court recognized the plaintiff’s rights in exceptional circumstances, among other things based on principles of good faith and considerations of fairness. This followed an examination of the overall factual picture, which found that no other party claimed rights in the property.

In this article, we analyze the judgment, explain the background and its main holdings, and examine its practical implications in real estate taxation – capital gains tax (date and value of acquisition in the absence of documents), purchase tax, rental income, and inheritance and intergenerational transfer issues.

What Exactly Happened in the Case

• The proprietary claim – the plaintiff claimed that her late husband’s parents purchased the apartment for her and her husband in 1967.
• The evidentiary problem – no purchase agreement, payment documents, tax reporting, Amidar documents, or classic ownership documents were presented.
• Registration status – the apartment was registered in the name of the State.
• Key indirect evidence (according to the publications) – long-standing conduct as holders of the rights, including ownership-related indications such as a building permit issued in relation to the property.
• Position of other parties – attempts were made to trace previous rights holders and heirs, and in practice no party was found who appeared and claimed rights. In some cases, it was even stated expressly that there was no interest in the property.
• The court proceeding – a claim for a declaratory judgment was filed. In procedural decisions, the court issued directions for filing pleadings and for a pre-trial hearing and also required clarifications regarding an inconsistency in the parcel details. A requirement was also added to attach a will/document and to explain why the State should remain a party to the proceedings.

In summary, the court viewed the overall circumstances as an exceptional case in which strict formal insistence on the written document requirement could produce an unfair result – and therefore ownership was recognized.

The Legal Context – Why This Is Exceptional

Two basic rules of real estate law were mentioned in the judgment:

1. The written document requirement in real estate transactions (Section 8 of the Land Law) – as a rule, a real estate transaction requires a written document, and without it the transaction is not valid.
2. The registration principle (Section 125 of the Land Law) – registration at the Land Registry is strong evidence of the content of the rights.

Nevertheless, case law has recognized that in the most exceptional cases, where there is a compelling call for fairness and the principle of good faith requires a different result, a right may sometimes be recognized even where there is no classic written document – especially where there is no opposing party who is harmed or who claims rights.

The Tax Significance

Although this is an extreme situation, it provides an important warning spotlight on problematic tax issues that also arise in more ordinary rights regularization cases: on the date of sale, on the date of transfer to children, or when reporting to the Israel Tax Authority is required.

Capital Gains Tax – How Is the Date of Acquisition Calculated?

When a court recognizes a right, it is still necessary to ask how the matter will be interpreted for tax purposes:

• If it is possible to establish that the right was acquired historically – the date of acquisition should be the historical date (for example, 1967).
• If the authority views the regularization as a new event (for example, due to a new engagement with the Israel Land Authority (RMI)/Amidar or a new grant of rights in practice) – there may be an attempt to argue for a different acquisition date.

The conclusion is that anyone conducting a civil proceeding to regularize ownership should already be thinking during the proceeding about the anchor points for the date of acquisition for tax purposes. Otherwise, a future sale may become stuck in an assessment dispute.

Acquisition Value – How Do You Prove the Price of a Property Without Documents?

When there is no agreement and no receipts, there are generally three tools you can use to prove the price of your property:

• Locating indirect documents (RMI, Amidar, municipal archives, permits, loan documents, correspondence, family documents).
• A historical appraisal of the value of the apartment/right in the relevant year.
• Collecting expenses and betterments that may be recognized upon sale (to the extent there is evidence).

We will add a short numerical example that easily illustrates how the date and value of acquisition have a significant impact on the amount of money.

Capital gains tax is calculated, in simple terms, according to the difference between the sale value and the acquisition value (before exemptions, expenses, indexation, and adjustments). Therefore, when there are no purchase documents and there is a dispute over the date and value of acquisition, the result can change materially.

Assume the sale of an apartment in 2026 for ₪2,000,000 

• If the date of acquisition is determined to be 1967 and the acquisition value is ₪120,000 – the gain (in simple terms) is ₪1,880,000.
• If, in certain circumstances, the regularization is viewed as establishing an acquisition at a later date (for example, 2025) and at an acquisition value of ₪1,600,000 – the gain (in simple terms) is ₪400,000.

It is important for us to emphasize: determining a later acquisition date may reduce the gain, but it may also involve another liability – such as purchase tax, payments to RMI, or a change in the status of the rights. The overall picture should therefore be examined with a professional, and not only the capital gains tax.

Purchase Tax – Where Is the Risk in Regularization Cases?

The risk is not in late reporting of an old acquisition, but in the regularization itself being interpreted as a transaction:

• Signing a lease/capitalization arrangement with RMI.
• Paying acquisition fees/lease fees.
• A material change in the right.

Sometimes the client views the regularization as a technical correction of the registration. From a tax law perspective, however, it may be considered a new transaction – triggering a reporting obligation and even purchase tax.

Tax on Rental Income – If the Property Was Rented Out

If the property was rented out in the past, the following should be examined:

• Whether the income was reported,
• Under which tax track,
• And whether there is exposure that requires regularization.

The right approach is to map the issues and not leave question marks that will be reopened specifically during the ownership regularization process.

RMI/Amidar – The Difference Between Judicial Recognition and Contractual Regularization

In cases where the State/RMI is registered as owner, there is a major difference between:

• A judgment that leads to a correction of the registration,
• And a new agreement with RMI/Amidar that includes payments and a reshaping of rights.

From a tax perspective, the second option may constitute a tax event.

Inheritance and Intergenerational Transfer

When a spouse passes away and the rights are not registered:

• The heirs will have difficulty proving the future date and value of acquisition,
• And regularizing ownership becomes a critical issue before distributing an estate or selling.

How We Can Help

Nimrod Yaron & Co. specializes in Israeli and international taxation. For years, we served at the Israel Tax Authority, handled the largest cases – as well as smaller cases – and participated in decisions that affect people’s lives and companies’ operations. We have seen firsthand how proper tax planning turns a transaction into an excellent one, and how critical attention to tax planning is when a company reaches an exit or an IPO.

The firm mainly advises private and public companies, Israeli and foreign companies, global venture capital funds, and also clients who need only one hour of professional advice – in a straightforward conversation with a lawyer or accountant.

Our firm has extensive relationships with accounting firms and law firms around the world, and a relationship management team that helps our clients receive a complete tax support package.

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