Facts
Spouses A.A. and B.A. née C. operate an agricultural business in U./AG. For the purpose of constructing a road, the Canton of Aargau required a portion of the cultivated land farmed by the spouses. After negotiations, a "Acquisition and Expropriation Contract" was concluded on September 26, 2006. In this, the spouses undertook to cede 3,540 m2 of cultivated land, for which the Canton paid an amount of CHF 12.--/m2, a total of CHF 42,480.--. In addition, the Canton paid compensation of CHF 3,007.20 for the loss of ecological areas and committed itself to a lump-sum compensation for "reduced value, inconveniences, etc." in the amount of CHF 210,000.--.
The spouses recorded the lump-sum compensation of CHF 210,000 in the 2006 financial statements by means of a write-down on the fixed assets. The Tax Commission U./AG considered this write-down to be inadmissible and included it as income from self-employment in the 2006 tax assessment. After several instances, the case ultimately reached the Federal Supreme Court.
Considerations
The Federal Supreme Court holds that the lump-sum compensation of CHF 210,000 is generally to be qualified as taxable income. The compensation for lost profits, whether due to increased expenses or reduced earnings, falls under the category of replacement income and is therefore subject to tax.
With regard to the write-down of CHF 210,000 on the account "Land and Improvements", the Federal Supreme Court concludes that this is not justified. The book value of the property was significantly below the market value, so that an extraordinary write-down was not necessary. The Harmonization Law provides for different valuation standards for income and wealth tax for agricultural and forestry properties, so that the…