Facts
B.X. and A.X. are domiciled in the canton of Geneva. B.X., who operates an independent physiotherapy practice, is the sole heir of her father who passed away in 2005 and who ran an architectural firm and was active in the real estate sector. For the years 2002 to 2005, the father incurred significant losses in his independent business activity, which were taken into account in the calculation of his taxable income. After her father's death, B.X. took over the architectural practice in 2006.
For the years 2010 and 2011, B.X. and A.X. declared the income from B.X.'s independent activities and requested to carry forward the losses incurred by B.X.'s father prior to his death. The Tax Administration refused to allow the carry-forward of these losses, considering that it was not possible for the heirs to carry forward the losses of the deceased's independent business activity.
Considerations
The Federal Tribunal confirmed the decision of the Tax Administration. According to case law, the carry-forward of losses is in principle linked to the person of the taxpayer carrying on an independent activity, and not to the business itself. Thus, the heirs cannot carry forward the losses of the deceased's independent business activity, even if they continue that activity.
The Federal Tribunal rejected the appellants' argument that Articles 560 of the Swiss Civil Code and 12 of the Federal Act on Direct Federal Taxation would allow the transfer of losses to the heirs. It explained that the tax succession provided for…