Federal Supreme Court, 29.12.2025, 9C_622/2024
Facts
In 2014, a married couple purchased a developed property for CHF 750,000. In 2019, they completely demolished the existing buildings to construct a new detached house. In 2021, they sold the property for CHF 4,200,000.
For the calculation of real estate capital gains tax, the cantonal tax authority only allowed a portion of the initial acquisition price to be deducted, corresponding to the value of the land alone, excluding the portion related to the demolished buildings. The taxable gain was set at CHF 1,600,375.
The Cantonal Administrative Court, the final cantonal instance, ruled in favor of the taxpayers. It held that the total acquisition price of CHF 750,000 should be deducted and allowed a portion of the new construction costs to be deducted on the grounds of protection of good faith. The cantonal tax authority appealed this decision to the Federal Supreme Court.
Legal Analysis
According toArt. 12 para. 1 of the Federal Act on Tax Harmonization (LHID), the taxable gain corresponds to the proceeds from the sale minus investment costs. These include the acquisition price and capital expenditures (value-enhancing expenses).
To determine the gain, cantons must respect the principle of congruence (or comparable conditions). This principle requires that the sale proceeds and investment costs relate to a property that is identical in substance and scope. Increases or decreases in substance between acquisition and sale must be taken into account. Real estate capital gains tax should only apply to the "unearned" appreciation of a property, not to the value added by the seller's labor or capital.
Application to the case
The Federal Supreme Court reiterated its consistent case law that, under the principle of congruence, investment costs relating to buildings that no longer exist at the time of sale are not deductible. The demolition of a building constitutes a private capital loss, which is irrelevant for income tax purposes and cannot be indirectly offset by a deduction under real estate capital gains tax. The object sold (land and new house) is not identical to the object purchased (land and old buildings). Consequently, the lower court violated federal law by authorizing the deduction of the entire acquisition price. Only the portion of the acquisition price attributable to the land, i.e., CHF 426,000 (56.8% of CHF 750,000), is deductible.
Regarding the costs of the new construction, the Federal Supreme Court ruled that they constitute entirely value-enhancing expenses, which are deductible for the calculation of the real estate gain. The lower court erroneously classified a portion of these costs as maintenance expenses (deductible from income tax) based on a misinterpretation of BGE 149 II 27. That judgment concerns complete renovations of existing buildings and not, as in this case, a replacement construction following demolition. There is therefore no need to invoke the protection of good faith, as the total construction costs (CHF 2,025,027) are deductible for real estate capital gains tax purposes.
The taxable gain is therefore recalculated as follows: Sale proceeds (CHF 4,106,000) minus investment costs (acquisition price of the land [CHF 426,000] + construction costs [CHF 2,025,027] + incidental costs [CHF 196,348]), resulting in a total of CHF 1,458,625.
Outcome
The Federal Supreme Court partially upheld the appeal of the cantonal tax authority. It set aside the decision of the Cantonal Administrative Court and remanded the case to the tax authority for a new assessment based on a taxable real estate gain of CHF 1,458,625.
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