Federal Supreme Court, 23.02.2026, 9C_297/2025
Facts
Two farmer brothers, co-owners of a plot of land located in an agricultural zone in the canton of Geneva, entered into a sales and purchase agreement with the canton of Geneva in March 2014 for a price of CHF 1,399,544. The sale was intended to allow for the expansion of a cantonal facility.
The sales agreement was subject to three conditions precedent:
- Obtaining a decision from the Agricultural Land Commission (CFA) authorizing the division of the plot and the exemption of the sold portion from the Federal Act on Rural Land Law (LDFR).
- The agreement of the municipality of H.________ to sell a replacement plot to the farmers.
- Authorization from the CFA for the farmers to acquire this replacement plot.
As of May 2014, after the signing of the agreement but before the conditions were met, the canton of Geneva took possession of the plot, planted a forest, and built parking spaces on it.
In September 2015, the CFA issued the exemption for the sold plot, concluding that due to the developments carried out (forest and parking lots), it was no longer suitable for agriculture. As the other conditions were also met, the final sale was concluded by notarized deed in December 2015 and February 2016.
The Geneva cantonal tax administration (AFC) taxed the entire real estate gain realized by one of the brothers (and subsequently by his heirs) as income from self-employment for the 2016 tax year, refusing to apply the preferential tax regime for agricultural properties. The successive appeals by the heirs of the deceased taxpayer were rejected by the cantonal authorities, leading them to appeal to the Federal Supreme Court.
Law
The dispute concerns the application of the tax privilege provided for inArt. 18 para. 4 of the Federal Act on Direct Federal Tax (LIFD) and the corresponding harmonized cantonal provisions (Art. 8 para. 1, 2nd sentence, LHID). Under this regime, profits from the sale of agricultural or silvicultural properties are only added to taxable income up to the amount of investment costs.
To benefit from this privilege, the property sold must be classified as "agricultural" within the meaning of the Federal Act on Rural Land Law (LDFR). According to established case law, this classification must be examined at the time of the legal alienation of the property, i.e., at the time of the transfer of ownership.
When a sales contract is subject to conditions precedent (Art. 151 CO), the claim and the obligations arising from it only take effect once the condition is fulfilled. This principle applies as long as the fulfillment of the condition remains uncertain. Case law has confirmed this approach, particularly regarding real estate sales contingent upon obtaining a building permit, the outcome of which is inherently uncertain.
Application to the specific case
The Federal Supreme Court had to determine when the plot lost its status as agricultural property and whether, at the decisive moment of the alienation, it could still benefit from the tax privilege.
The appellants (the heirs) argued that the relevant moment for assessing the agricultural nature of the plot was the signing of the sales agreement in March 2014. According to them, the conditions precedent were merely formalities whose fulfillment was certain, particularly because the canton had taken immediate possession of the property.
The Federal Supreme Court rejected this argument. It ruled that the conditions precedent, particularly the decision on declassification by the CFA, were by no means mere formalities. Obtaining such an administrative decision, much like a building permit, is inherently uncertain. Consequently, the transfer of ownership and thus the alienation for tax purposes only occurred with the conclusion of the final deed of sale in December 2015 and February 2016, after all conditions had been met.
The Federal Supreme Court then examined the nature of the plot at that specific time. It noted that in September 2015, prior to the final sale, the CFA had issued a formal and enforceable decision on declassification. This decision had the effect of officially stripping the plot of its status as agricultural property under the Federal Act on Rural Landed Property (LDFR).
The fact that the loss of agricultural use was attributable to the buyer (the canton) or that the developments (forest, parking lots) were potentially reversible was deemed irrelevant. What is decisive is that, at the time of the transfer of ownership, the plot was objectively and legally no longer an agricultural property due to the CFA's decision. The legal compliance of this CFA decision cannot be reviewed within the framework of the tax assessment procedure.
Therefore, at the time of the alienation, the plot no longer met the conditions for the application of the tax privilege under Art. 18 para. 4 DBIG.
Outcome
The Federal Supreme Court dismissed the heirs' appeal regarding both direct federal tax and cantonal and communal taxes. It upheld the decision of the Geneva Court of Justice and the ordinary taxation of the real estate capital gain. The court costs are to be borne by the appellants.
Silex tax newsletter published in collaboration with Anna Vladau, Attorney at Law
