22 The currently applicable inheritance tax law distinguishes between 3 inheritance tax classes; tax class I is the most favourable, tax class III the least favourable. Degree of relationship Tax class Tax allow- ance Spouses I 307,000 Children, step children, children of deceased children I 205,000 Grandchildren, parents and grandparents (in the event of inheritance) I 51,200 Parents, grandparents (except in the event of inheritance), sibling, nephews, nieces, step-parents, parents-in-law/children-in-law, divorced spouses II 10,300 Domestic partners III 5,200 Other III 5,200 Furthermore, in individual cases, other exemptions may apply. However, every 30 years, the foundation is subject to notional inheritance taxation which offsets any tax advantages it may have benefited from. Loopholes for creative taxpayers are very limited; these may establish several family foundations to optimise tax allowances. Real estate transfer tax may be due on the transfer of real estate. In most cases, however, family foundations are set up without consideration and therefore not subject to real estate transfer tax. ? At the level of the founder For founders, hidden reserves may be revealed upon withdrawing of assets, which would have consequences with regard to earnings tax. ? Regular Tax Treatment of the Foundation The income of private foundations is subject to the full corporate tax rate of 15% and the solidarity surcharge of 5.5% of the corporate tax. Moreover, notional inheritance taxation on family foundations takes place every 30 years in order to ensure that the foundation assets are not parked for generations without inheritance tax being levied on them. Payments to beneficiaries as well as the deduction of the substitute inheritance tax (Erber- satzsteuer) do not reduce the corporate tax assessment base. Taxation of Payments to Beneficiaries and upon liquidation ? At the level of Beneficiaries Payments by the family foundation to the beneficiaries are subject to personal income taxa- tion as income from capital. As part of the corporate tax reform 2008, the half-income tax rule