Facts
The appellant, [A.], had joined [B. AG] in 2001 to succeed the then controlling shareholder C. To regulate the succession, the parties concluded several contracts, including an employment contract between [A.] and [B. AG] as well as a succession agreement. According to the latter, [A.] was to successively acquire shares in [B. AG] and join the management bodies.
In October 2003, [B. AG] terminated the employment contract. [A.] then sued for the transfer and delivery of 2,880 shares that were to be transferred to her under the succession agreement. By arbitration award dated November 15, 2005, [B. AG] was obliged to pay [A.] an amount of 4,000,000 Swiss francs as "compensation for all claims".
The tax authorities assessed [A.] for the 2005 tax period with an income of 1,950,000 Swiss francs, as they considered the settlement payment to be taxable income. [A.] contested this assessment.
Considerations
The Federal Supreme Court ruled that the part of the settlement payment that served to compensate the fair market value of the 2,880 shares is tax-free. [A.] had acquired a fixed legal claim to these shares, so that their waiver is equivalent to a sale. To the extent that the settlement payment covered the acquisition costs of the shares, there is a tax-free change in assets. Any increase in value would be treated as a tax-free private capital…