Federal Supreme Court, 05.21.2026, 9C_295/2025
Facts
In 2007, A. (the appellant) acquired a property for CHF 361,000. On July 5, 2022, he sold it for CHF 1,380,000. In his real estate capital gains tax return, he declared a gain of CHF 194,774 after deducting various expenses, including a commission of CHF 255,000 paid to B. AG (a company of which he was a director) and capital improvement expenses of CHF 484,734. (Sachverhalt A.a, A.b, A.d)
The cantonal tax administration (the tax authority) challenged these deductions. It refused the commission deduction, deeming it unenforceable due to the close relationship between the seller and the company, and rejected the majority of the alleged capital improvement expenses, classifying them as maintenance costs. Following an initial assessment setting the gain at CHF 1,005,123, the tax authority partially admitted the appellant's objection and recognized capital improvement expenses totaling CHF 127,574, reducing the taxable gain to CHF 877,549. (Sachverhalt A.e)
The taxpayer's successive appeals to the Administrative Appeals Commission and subsequently the Administrative Court of the Canton of St. Gallen were dismissed. The appellant then appealed to the Federal Supreme Court, requesting the full deduction of the CHF 255,000 commission and the recognition of additional capital improvement expenses, notably for the attic conversion, totaling CHF 333,652.60. (Sachverhalt B, C)
Legal Analysis
The Federal Supreme Court reiterates that the taxable real estate capital gain corresponds to the difference between the sale price and the investment costs (acquisition price and capital expenditures), in accordance withArt. 134 of the St. Gallen Tax Act (StG/SG). Cantons have a certain margin of discretion in defining the concepts of "investment costs" and "proceeds of sale" within the framework of the Federal Act on Tax Harmonization (LHID). (consid. 4.1, 4.2)
Deductible capital expenditures are those that have resulted in a lasting increase in the value of the property, such as planning, construction, or improvement costs (Art. 137 para. 1 let. a StG/SG). These expenses must be distinguished from maintenance costs (value-preserving expenses), which are deductible from taxable income. The burden of proof for this distinction lies with the taxpayer. In the absence of sufficient evidence, particularly for older work, the tax authority may estimate the capital improvement portion. (consid. 4.2)
Regarding brokerage commissions, their deductibility is not uniformly prescribed by federal law. According to practice and legal doctrine, for a commission to be deductible from a real estate capital gain, the taxpayer must prove not only the existence of a brokerage contract and the payment of the commission, but also the reality of the brokerage activity and the causal link between that activity and the conclusion of the sale. The burden of proof rests entirely on the taxpayer. (consid. 4.2)
The Federal Supreme Court also notes that new evidence is only admissible if it arises from the decision of the previous instance (Art. 99 para. 1 LTF), which was not the case here regarding a sales file that the appellant could have submitted earlier. (consid. 2.3)
Application to the Case
The Federal Supreme Court examines the two points in dispute: the brokerage commission and the capital improvement expenses.
Regarding the CHF 255,000 commission paid to B. AG, the Federal Supreme Court upholds the analysis of the lower court. It finds that the appellant failed to meet the burden of proof. Simply providing a statement from the new owner of B. AG and proof of payment is insufficient to demonstrate actual brokerage activity and, crucially, a direct causal link to the property sale. The lower court correctly noted the lack of evidence regarding specific mediation efforts (such as listings or viewings) and the close economic relationship between the appellant and the company receiving the commission. Consequently, the refusal to deduct this commission is not arbitrary. (consid. 5.1, 5.2.1)
Regarding capital improvement expenses, the dispute concerns the balance of costs claimed for the attic conversion, beyond the CHF 127,574 already accepted by the tax authorities. The Federal Supreme Court notes that while the appellant proved that costs were incurred, they failed to demonstrate that these works were primarily or exclusively capital improvements rather than maintenance costs. Renovating an old building inevitably involves a significant portion of maintenance. In the absence of detailed supporting documents allowing for a clear breakdown, the estimate made by the tax authority based on a comparison of new value ("Neuwertvergleich") and confirmed by the cantonal courts is not considered arbitrary. The appellant's arguments do not demonstrate a manifestly incorrect assessment of the facts or a violation of the law. (consid. 5.1, 5.2.2)
The Federal Supreme Court also rejects the claim of a violation of the right to be heard, finding that the reasoning of the cantonal judgment, while concise on certain points, was sufficient to allow the appellant to understand the grounds for the decision and to challenge it with full knowledge of the facts. (consid. 3.2)
Outcome
The Federal Supreme Court dismisses the appeal to the extent that it is admissible. It upholds the decision of the Administrative Court of the Canton of St. Gallen, thereby validating the calculation of the taxable real estate gain at CHF 877,549. The legal costs, amounting to CHF 6,000, are to be borne by the appellant. (consid. 1, 6)
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