Swiss Federal Supreme Court, 09.02.2026, 9C_126/2024
Facts
As part of his estate planning, an entrepreneur (A.A.) transferred several assets to his children via a 2016 inheritance agreement, including a sole proprietorship and a property given to his daughter. The agreement stipulated that the daughter was to sell this property within two years to settle the debts of the inherited sole proprietorship. The sale took place in December 2016 for CHF 11 million.
The cantonal tax authority classified the property as business assets of the deceased entrepreneur. It held that its transfer to the daughter constituted a private withdrawal, making the capital gain (latent reserves) taxable as a liquidation gain. This classification was upheld by successive cantonal courts. The heirs appealed to the Federal Supreme Court, arguing that the property belonged to their father's private assets and that the gain realized was therefore tax-exempt.
Legal Analysis
The Federal Supreme Court reiterates the fundamental distinction between capital gains realized on business assets, which are taxable as income from self-employment (Art. 18 para. 2 DBG), and capital gains realized on private assets, which are tax-exempt (Art. 16 para. 3 DBG).
The transfer of an asset from business assets to private assets (private withdrawal) is treated as a disposal and triggers the taxation of latent reserves.
To determine whether a person is engaged in professional real estate trading—which implies that the assets in question are business assets—a comprehensive assessment of the circumstances must be conducted. Key indicators include: the systematic and planned nature of the operations, the frequency of transactions, short holding periods, significant reliance on debt financing, a close link to the taxpayer's professional activity, the use of specialized knowledge, and the reinvestment of profits into similar assets. Simple management of a real estate portfolio, even if professional and large-scale, for the purpose of generating rental income is generally considered private asset management.
Application to the Case
The Federal Supreme Court conducts a detailed analysis of the indicators and contradicts the assessment of the lower court.
It finds that the deceased entrepreneur's activity did not have a systematic and planned character aimed at achieving quick gains through real estate transactions. Acquisitions were opportunistic, and properties were held for very long periods (often nearly 20 years or more), generating rental income. This long holding period strongly supports the conclusion of a long-term capital investment (private assets) rather than a trading activity.
The acquisition phase took place between 1984 and 1997, followed by a divestment phase much later, at an advanced age, which corresponds more to wealth restructuring for retirement and succession purposes than to a commercial activity.
Regarding the use of debt financing, the Federal Supreme Court considers that the risk taken was not necessarily that of a professional trader, given the diversified portfolio and the nature of the assets. Similarly, the deceased's professional proximity to the construction sector (electrical business) is not sufficient to establish the existence of specialized knowledge in real estate trading.
Finally, the fact that the proceeds from the sale were used to pay off the family business's debts is not a decisive criterion. The allocation of sale proceeds does not retroactively change the nature of the asset, which must be evaluated based on the characteristics of the real estate activity itself. In this case, that activity was akin to private asset management.
In conclusion, an overall assessment of the indicators shows that the criteria for professional real estate trading have not been met.
Outcome
The Federal Supreme Court upheld the heirs' appeal. It overturned the cantonal court's decision, ruling that the property in question was part of the deceased's private assets. Consequently, the profit realized from its sale constitutes a tax-exempt private capital gain (Art. 16 para. 3 ITA). The case has been remanded to the cantonal tax authority for reassessment in accordance with this ruling.
Silex tax newsletter published in collaboration with Anna Vladau, Attorney at Law
