Facts
In 1997, X AG, headquartered in Basel, acquired the entire share capital of Y AG, domiciled in Zurich, which was the owner of the property on A.-Strasse in Zurich. In 1998, it was decided to sell this property, which was carried out by Y AG in 1999. X AG took over Y AG retroactively as of January 1, 1999, including its assets and liabilities. For the period after the merger until the sale, X AG held the A.-Strasse property in its trading portfolio.
The Commission for Real Estate Taxes of the City of Zurich assessed a taxable real estate gain from the sale of the property in Zurich in 1999 and imposed the real estate capital gains tax on X AG as the legal successor of Y AG. X AG filed a constitutional appeal due to intercantonal double taxation.
Considerations
The Federal Supreme Court decided that the increase in value of the business property of Y AG in Zurich, which was used as a business property until the sale in May 1999, is to be assigned exclusively to the Canton of Zurich as the canton of situs for taxation.
However, the Canton of Zurich must offset any business loss incurred by X AG in the canton of domicile Basel-Stadt and in other cantons with permanent establishments against the real estate gain when taxing the increase in value. This loss offset applies not only to real estate…